Q2 2021 Patrick Industries Inc Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to Patrick Industries Second quarter 2021 earnings Conference call. My name is Darrel and I'll be your operator for today's call. At this time all participants are in a listen only mode.
The question and answer session will follow the formal presentation starting on once you require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note that this conference is being recorded.
And I will now turn the call over to MS. Julie Ann Kotowski from Investor Relations. Mr. Catastrophe you may begin.
Good morning, everyone and welcome to our call. This morning, I am joined on the call today by Andy Nemeth, CEO, Jeff protein O President and Jake pack of Itch CFO.
Certain statements made on today's conference call regarding Patrick industries, and its operations may be considered forward looking statements under the securities laws.
There are.
For a number of factors many of which are beyond the company's control, which could cause the actual results and events to differ materially from those described in the forward looking statements.
These factors are identified in our press releases, our form 10-K for the year end of 'twenty 'twenty and on our other filings with the Securities and Exchange Commission.
We undertake no.
Obligation to update these statements to reflect circumstances or events that occur. After the date. The forward looking statements are made.
I would now like to turn the call over to Andy Nemeth.
Thank you Julien good morning, ladies and gentlemen, and thank you for joining us on the call today.
I would especially like to welcome Jeopardy, now who on his new role as president.
President continues his legacy of leadership and deep knowledge of our business and end markets. We're absolutely thrilled the Jeff has taken on this new role offerings for novel experience and insight into our products customers and people and I'm very excited to continue to work with him as he brings his energy wisdom and vision to our businesses in tea.
Our second.
Quarter of 2021 reflects continued quarter over quarter, and sequential strong topline growth and profitability as well as the exciting expansion of our footprint the capabilities and the leisure lifestyle markets.
This has been the trend over the last 3 quarters as we emerge from the uncertainty of Covid. It.
It has become clear that outdoor recreation and housing needs will be front and center.
And the like family and friends spent quality time together.
<unk> as consumers continue to invest in the security of homeownership for fun.
Analogy on value of home improvement remains strong the.
Year has passed since we felt the full early stage of impact of Covid in the second quarter of 2020, we diligently exercise of the flexibility of our business model reinforces.
Our resilience, we were able to drive profitability. Despite a 6 week shutdown of our plants in line with the Oems and pause on our Capex and acquisition of initiatives.
The emerging from the second quarter of 2020, we quickly shifted gears from defensive to offensive and immediately began reinvesting in our business to supply the explosive growth in not only of.
For 6 style, but housing as well.
Fast forward. The Q2.2021, and we are operating in a very dynamic and exciting marketplace.
By the incredible on growing horsepower of what now approximates more than 10000 team members, who are providing RV marine MH and industrial solutions to our customers.
Supply chain of volatility.
<unk> is in the quarter required our teams to remain flexible debt creative collaborate and work together between brands and reach out to our deep network of partners to secure of essential materials needed to deliver on growth in our primary end markets. We.
We have continued to partner with the Oems of builders in all of our markets as well as they have demonstrated tremendous for.
On the ability and adapting their business model and build schedules to match up with the supply chain constraints on opportunities.
The leisure lifestyle markets represented 74% of our revenue in the quarter and consumer demand has remained strong throughout the spring and summer.
The evidence is everywhere with national parks seeing record visits and marine is continues to be it.
Flex capacity as the adventure continues for friends and family to share experiences, while being right at the center of nature of in the outdoors with the luxury of having home based amenities.
And our housing and industrial markets, which together represent approximately 26 percentage of second quarter revenues housing repair and remodel and home improvement demand remained consistent.
Polk trend is a very tight housing market is supporting homeownership and investment in home improvement.
These trends and consumer preferences and activities all provide continued support for our primary end markets and our long term outlook on.
Operationally, the growing magnitude of our footprint and the agility of our position in our markets translated into strategic gains.
On the quarter as we continued leveraging of our fixed cost structure and automation efficiencies as well as driving continuous improvement initiatives, which further propel profitability.
The incredible talent dedication commitment and knowledge base of our team members and business unit leaders amplified our efforts in addition to our internal sourcing synergies purchasing.
<unk> R and supply chain relationships, resulting in a difficult for successful navigation of the current supply chain environment.
Our team members are continuing to demonstrate their passion for our products and customers as evidenced by their can do attitude tremendous resilience and willingness and desire to go the extra mile to match up with customer production schedules.
And for capital deployment and strategic investment in our infrastructure continues to drive our business in alignment with our disciplined capital allocation strategy.
Capex in software initiatives are and have been focused on automation and capacity expansion to continue to provide our differentiated solutions to our customers dynamic demand patterns.
We've also reinvest.
And in the business to leverage our foundation proactively take advantage of the strategic opportunities in front of us.
We've added talent and resources to support our ESG initiatives, which continue to be a high priority as we apply our company's vision and ambition to our sustainability journey.
Innovative material use minimization and optimization programs continue across.
On this operations to reduce waste, we use materials and recycled Hume.
Human capital management programs, including the leadership development training, continuing education, and cultural alignment develop our people and enhance their well being at work and at home to help foster on retained both our legacy and new talent.
As we have discussed.
Our beds unquestionably the talent and mindset of our people that provide the solutions and creative energy for our customers.
Our second quarter operating performance exhibited particularly strong year over year and sequential quarter over quarter growth given the comparison to the Q2.2020 backdrop of Covid related production shutdowns in.
In comparison.
Just the 2.2020, we saw triple digit growth in our RV and marine end markets and high double digit growth in our MH and industrial end markets.
The market strength, our teams operating model and the leveraging of our fixed cost structure translated into improved gross and operating profit margins operating income net income and diluted earnings per share.
Share during the quarter.
Our second quarter revenues of over $1 billion increased 141% of $596 million compared to the second quarter of 2020, and we earned $2.52 per diluted share.
I'll now turn the call over to Jeff Rodino, who will provide further details into our end markets.
Yeah.
Thanks, Andy and good morning, everyone. Our RV revenues were up $391 million for 192% in the second quarter and represented 58% of our consolidated sales.
RV wholesale shipments were up 101% totaling approximately 152000 units for the quarter.
We currently estimate retail.
Sales unit shipments also increased between 30% and 35% in the same period or resulted in between 190000 and 200000 units sold.
Dealers continue to quickly turn units to retail customers as restocking has not yet started.
OEM backlogs continue to rise, indicating a further extension of dealer inventory.
Our replenishment cycle.
Our estimates indicate the dealer inventories are down year over year of approximately 35% to 40% on TTM retail unit shipments that are up 35% to 40% over the same period.
Restocking of RV and marine retail inventories continues to be delayed as retail sales.
Inventory due to outpace the OEM production.
New and used inventory levels continue to deplete achieving historic lows as registered by weeks of inventory on hand.
RV and marine retail sales continued to be driven by a healthy and growing demographic trends as well as heightened interest in the leisure lifestyle space.
<unk> can to motivation of the new market participants for outdoor recreation continues as they discover the benefits of RV camping and boating activities.
The additional network effect of popularity and familiarity and the leisure lifestyle space fosters a platform of demand and growth.
Investment in RV campus.
Camping and boating infrastructure, which includes the of growing rental and Boone docking space.
It is driven by growing public and private capital investment.
The ease of social distancing outdoors as spring great interest in our national parks private lands and a variety of iconic coastal.
Inland opportunities.
All of the country.
Aftermarket activity is driven by RV and marine market upgrades continues to be driven by existing users.
And work and study from anywhere trends remained strong as hybrid work environments.
Become the new normal.
Strong dealer traffic growing.
Across hilarity of what the RV lifestyle offers in a variety of environments and the OEM investments and the differentiated products and dealer investment in education and product service continue to foster a compelling value proposition that provides growth opportunities.
On the marine side momentum Skus off the similar.
Growing population trends the day.
Also between wholesale and retail shipments indicates a continued depletion of powerboat inventory on the dealer lots and resulting similar extension of the restocking cycle.
Our marine revenues of $167 million, representing 16% of our sales.
And increasing as a percentage of our mix due.
The record Gannett and strategic efforts were up $107 million or of 182% for the quarter on estimated marine wholesale shipments that increased approximately 25% to 30% from the same period.
We estimate that the marine retail shipments were roughly flat in the quarter constrained by low dealer inventories true.
<unk>.
Slating into between 87% of 92000 units sold.
New boat owners are further driving a network effect and are fostering interest in the demographic demand hubs as well and family formation reached their peak levels.
Outdoor recreation trends in fiberglass.
Glass pontoons ski and wake and fishing continued to be fueled by a desire to be on the water.
Our estimates indicate that the marine dealer inventories are down more than 60% on TTM retail shipments that are up approximately 17% to 22% over the same period.
Demand the trajectory continues until wind fashion.
<unk> for Marine wholesale unit shipments and virtually all parties in the marine ecosystem are focused on ideal supply and demand dynamics for the back half of 2021 and beyond.
Our leisure lifestyle markets are ideally positioned to support sustained growth and are expected to continue to benefit from tailwind of lean inventories.
<unk> on attractive interest rate environment, and extremely compelling of outdoor recreation value proposition strong demographic trends and the expansion of the customer base.
Retail demand has not subsided and we believe the leisure lifestyle markets are poised for continued strength throughout the back half of 2021 through 2000.
<unk>, 2 and likely into 2023 based on our estimates and current market conditions.
Now turning to the housing and industrial side of our business.
New single family housing starts increased 42% in the quarter and multifamily housing starts increased 48%.
Demand for building supplies remains.
'twenty driven.
Driven not only by single and multifamily builds but also by home improvement projects and related do it yourself activities, indicating continued positive demand trajectory for the back half of 2021.
Housing demand supported by well formation and demographic trends low interest rates and household formation.
The patterns that support continued migration from urban to suburban areas lend.
Blend increasing support to our MH and industrial market businesses in single family and multifamily housing home improvement and the repair and remodel market.
Tightness in the housing market and related affordability of manufacturing.
The berthing represent strong dynamic for our housing and industrial markets.
Urban suburban and rural migration changes in housing spending patterns and the continued increase of both builder in the MH OEM backlogs indicate supply demand trends that we believe will continue growth.
In our industrial and MH end markets for the back half of 2021 and through 2022.
Our manufactured housing sales of $139 million represented 14% of our total revenues in the quarter, increasing 54% over the second quarter of 2020 on an estimated increase in MH wholesale shipments of.
Of 30%.
Oems started to unlock healthy backlogs in the quarter and made progress on the resolution of capacity constraints that had previously impacted and constrained production rates and schedules.
The a positive trajectory for MH production, and resulting demand for our supply to this market for the back half of 2021.
Revenues in our industrial market sector, where $119 million or 12% of our overall sales in the second quarter, increasing 69% compared to the prior year.
New housing starts increased 43% in the second quarter.
Our allocation of resources aligns with the trajectory.
Customer growth as we support secular trends and our for primary end markets.
Inventory depth attention to our consumer market interest our capabilities and multifaceted efforts to actively managing our supply chain and our disciplined capital allocation and financial strategies.
3 of our into our business for continued growth through the remainder of 2021.
As Andy noted, we are investing in software automation and specialized equipment needs, which will enable our team members to have better balance and serve our customers at the highest level.
I'll now turn the call over to Jay who will provide additional comments on our financial performance.
Thanks, Jeff and good morning, everyone. Our consolidated net sales for the second quarter increased 141% to 102 billion driven by.
<unk> is an all for primary end markets, while the increase reflects the impact of 6 weeks of shutdowns from any of our plans from the second quarter of 2020 the growth in consolidated net sales for this quarter demonstrates.
Position of our business model and our ability to support our customers.
Revenue from our leisure lifestyle markets, which are comprised of RV and marine increased 190% with RV and marine revenues up 192% and 182% respectively. RV content per unit increased 15% of $3543 per unit and.
The estimated marine content per unit increased approximately 60% to $2841 per unit revenues.
Revenues from our housing and industrial markets increased 60% in the quarter with MH revenues up 54% versus the prior year and industrial revenues up 69% compared to the prior year estimated.
The estimated MH content per unit increased 7% to for.
The strength of $806 per unit.
Gross margin for the second quarter was 20%, increasing 260 basis points compared to the prior year. The gross margin improvement was primarily driven by benefits of strong operating execution and leveraging our fixed cost realization of production efficiencies and overall continued investment in innovation and delivery of our products.
These gains were partially offset by labor cost pressures, which persist in the majority of our operating spaces.
Operating expenses were 10, 7% of sales compared to 14, 5% in 2020, which reflect the realization of capital investment efficiencies and related fixed cost leverage as noted during.
<unk> sales growth expansion of all of our primary end markets.
Warehouse and delivery expenses decreased 140 basis points as we maximize the efficiencies of our transportation and warehousing capabilities. During a period of robust demand for our products SG&A expenses were 5.9% of sales in the quarter of 150 basis point decrease compared to the prior year again, primarily reflecting the management of our expense base alongside of efficiencies driven by.
That's been the processes and people.
Operating income of $95.3 million increased 688% in the second quarter and operating margin of 9.3% increased 640 basis points, primarily due to the strong execution on the quarter in comparison to the impact of Covid in the second quarter of 2020.
Our diluted earnings per share on the second quarter was $2.
<unk> 52 up from <unk> <unk> from the prior year.
Yeah.
Our overall effective tax rate decreased to 26, 9% for the second quarter of 2021 compared to 44, 4% on the prior year.
Second quarter of 2020 reflects the relative impact of changes in taxes against the modest net income generated during Q2.2020 shutdowns.
We expect our overall effective tax rate for the full year 2021 to be between approximately 24% and 25 per cent.
Looking at cash flows we generated approximately $28.4 million of operating cash flows for the second quarter of 2021 compared to $26.2 million for the prior year quarter.
Our operating cash flows were impacted by the timing of our fiscal.
Down in Florida, as we collected approximately $26 million on receivables within 2 days after the quarter end.
The second quarter of 2020 demonstrated our ability to monetize working capital during the short term curtailment of activity during Covid disruptions in Q2.2021 reflected the use of our strong liquidity position to finance working capital commitments and aggressively do our best to support the supply.
Net inventory to OEM producers. This was in support of production commitments during the competitive dynamic supply chain landscape as we proactively secured and manage inventory in the second quarter of 2021 to maintain production schedules for our OEM customers. We invested in net working capital and therefore, our cash conversion cycle expanded to accommodate demand and ensure that we strategically.
<unk> put ourselves on the best position possible to meet our customers' production schedules.
We believe this dynamic pivot to intervene in an aggressive supply chain of environment will play out in the operating cash flow expansion of future periods of the supply chain normalizes.
In alignment with our disciplined capital allocation strategy, we invested $12 million of capital expenditures for the quarter to support capacity expansion and automation.
Of the growing end market demand.
Additionally, we deployed $239 million of acquisition capital in the second quarter of 2021 and.
In April we completed the acquisition of <unk> welcoming their industry, leading proprietary non slip flooring to the marine OEM and aftermarkets to the Patrick family of leading brands.
And the same month, we acquired.
Alpha systems, whose world class production facilities provide proprietary roofing adhesives, and sealant products, the RV OEM and aftermarket channels.
Both acquisitions further enhance our scale increased the diversity of our products and solutions grow our aftermarket presence and expand the depth of our penetration of the leisure lifestyle markets.
And second quarter in accordance with our dividend policy.
We returned nearly $7 million for shareholders in the form of quarterly dividends and we further deployed $22 million on the form of opportunistic share repurchases.
In April in support of our strategic growth plan and the alignment with our financing strategy, we should $350 million of for 75% Senior notes due 2029 contemporaneously with the issuance of these new notes.
We extended the maturity of our credit facility to April 2026, enhance the flexibility of our credit agreement and increased the aggregate credit facility size to $700 million.
At the end of the second quarter, we had approximately $468 million of total liquidity comprised of $58 million of cash on hand unused capacity on our revolving credit facility of 400.
<unk> hundred $10 million and the total net leverage ratio of 2.3 times our.
Of our comfortable leverage on strong liquidity position us well the continued to execute on our strategic growth initiatives as well as continue our unyielding support of our customers' needs.
For 2021, RV IAA currently estimates for an approximate 34% increase in wholesale unit shipments to 500.
The 76000 units with an upside range of 586000 units and our current estimate points towards the higher end of that range.
Based on current market conditions and trends, we are presently estimating RV retail to be up low double digits for the full year. We currently anticipate marine wholesale to be at 25% to 30% over the 2020 shipment rates on retail.
It is estimated to be up low single digits and only constrained at this point by inventory levels.
Based on these estimates and the continued strong retail demand expectations, we believe channel inventories on both the RV and marine markets will remain well below recent historic levels, and we will not be calibrated to a new normal until likely late into 2022 and 2023.
And the manufactured housing and industrial markets. We currently expect MH wholesale unit shipments to increase low to mid double digits in 2021, and new housing starts to continue their strong trajectory of double digit growth in 2021, we've continued to invest in our capabilities to strive to ensure that we can meet increasing OEM demand as the markets grow at a rapid pace.
Geographic diversification and scale will further enable us to support and capture the growth of our addressable end markets.
Our strong cash flow on liquidity support investments on our end market platforms, we estimate approximately $300 million of operating cash flow and 50% to $55 million of capital expenditures for the full year 2021, which reflects increased investment in automation projects.
<unk> offset the expected continued tight labor market in the long term demand expectations, enabling us to continue to support and drive organic growth across all of our end markets.
That completes my remarks Andy.
Thanks, Jake while supply chain constraints play out due to an expanding global economy strong consumer balance sheets and.
The factoring capacities coming online the growing sophistication of our deep bench of talent across our platform is driven on even more compelling collaborative effort with our OEM customers.
At the same time, our interaction with the robust trends on the leisure lifestyle aftermarket have led to growing promising capture of opportunities.
The quarter was as dynamic as we.
<unk> and the talent and dedication of our people illustrated our ability to strive to provide the best service and products to our customers.
The organization team and brands are clearly better together, especially during volatile times and our opportunities for both organic and strategic growth and harmonies are significant.
Our proactive investment.
And our infrastructure teams innovation and culture continues to be a bright spot coupled with our technology investments and intelligent expansion of strategic IP and software initiatives.
We believe these initiatives will improve our organic capacity and provide us with the opportunity to better partner with our customers and enhance their growth in both leisure lifestyle.
We have seen markets.
The wellbeing of our nearly 10000 team members will remain a core focus their dedication and outstanding execution. During this quarter complement our investments in their success and will drive our efforts to unlock fragmented markets innovate and deliver quality products and reliable service to our customers.
This is the end of our per.
And how remarks, we are now ready to take questions.
Thank you we will now be conducting a question and answer session. If you would like to ask the question. Please press star 1 on your telephone keypad, a confirmation tone will indicate your line is in the question of Q U.
The press Star 2 if you would like to remove yourself from Mchugh.
Preparing for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, 1 moment. Please while we poll for your questions.
Our first questions come from the line of Brett Andrus with Keybanc capital markets. Please proceed with your questions.
Hey, good morning, guys.
So Andy looking at RV wholesale shipments each months, we've kind of.
Plateaued at around the 50000.
Unit of month pace I, just wanted to get your thoughts on.
When or if you think the industry can kind of start to break out of that range or if these constraints are.
Kind of with us for the foreseeable future, which which I guess I don't think it's necessarily a bad thing.
Sure Brett what.
What we would tell you is I think that we're going to see some supply chain constraints for the next quarter or 2 as the.
The kind of global economy picks back up and continues to grow.
We're definitely seeing robust demand.
There on the retail side on the wholesale side and we would tell you is at 50000 units a month, we think that's a we think that's a very compelling run rate today and it keeps everything in balance from our perspective. So I think the other thing that we're hearing it really across the platform, especially in leisure lifestyle is the.
The Oes are are looking to be able to.
Increased capacity you know as we go forward so as the supply chain eases up a little bit our anticipation would be is that we'll be able to match up with increased production rates going forward, but I do see it for the next quarter or 2 but again I don't think it's a bad thing today.
It's stressful certainly in but 1 of the things Thats come out of it is of tremendous collaborative relationship.
<unk> between ourselves and our OEM partners, we're mixing and matching together to really be able to maximize opportunities as it relates to production schedules. Today. So I don't think 50000 units per month is bad and I think there's opportunity for improvement in the future, but overall, we feel good about where we're at today, we're going to continue to work hard.
To mitigate the supply chain constraints, it's really everywhere.
Everywhere, we look and so again I think we're doing our teams have done a phenomenal job of matching up and we'll look for that to continue.
Got it understood and then.
Sorry, if I missed this earlier, but did you give any update on how youre thinking about the.
80 to 100 basis points of operating margin.
Improvements you laid out on the last call.
Don't know if there's any moving pieces on the back half of the year.
And then and then also I think you gave an operating cash flow guide, but how much working capital do you think you need to build in the back half from here.
Hey, Brad it's Jake I appreciate the questions when I, when we think about our.
Some of your first question, we're thinking about the continued evolution of that view and I would tell you that when we started the year of at 80 to 100, and we're now thinking that that's more of 100 of 120.130 basis points of expansion on a year over year basis.
We're certainly seeing a lot as Andy mentioned and I did as well on every marks for seeing the leverage of our.
Fixed costs, we have a great absorption on those of course as you would expect we're also seeing a lot of great benefits.
Benefits coming from our cost initiatives are our ability to manage our labor force and as well as the automation of the Capex investments that we've made in the business, which are really starting to show through in a very positive way on our margin line.
When we think about the the investment in inventory.
I would.
I'd tell you that.
You probably recall that the at the beginning of this year, we spoke about our proactive interest inventory grow in the fourth quarter to make sure. We are on our front foot as we came into what we expect it to be some significant demand in the first quarter and that certainly has played out very well I would tell you when I look at our working capital I think about us being kind of up on planed for that 50.
I was on a month that you were speaking to them and how that works for our business. So.
As we continue to grow there'll be continued investments in inventory and as Andy mentioned with a little bit of supply chain comes a little bit of a little bit of investment in.
And that an increased cost on some of that inventory, but the but I would tell you. We're in a pretty good spot from a continuity.
The third respect of where our balance sheet looks at the current production levels, which we expect to see persist for the rest of this year.
Great. Thank you guys.
Thank you.
Thank you. Our next question does come from the line of Daniel Moore with CJS Securities. Please proceed with your questions.
Good morning, Andy and Jay can congrats Jeff and thanks for taking questions.
Good morning, good morning.
Maybe just start with topline you.
Can you give a sense of it.
The revenue contribution from businesses acquired over the past 12 months as well as what the impact of pricing of you know.
Passing.
Through of higher raw materials.
Any any sense of what each of those how those impacted the Q2.
Sure Dan It's Jack again.
Thanks again for dialing in today.
Well as you can see we're up 140% the kind of the year over year basis, and so we think about the breakdown in the composition of that number tells you about.
The 20% of that is due the acquisitions, we've made and in the interim period and there are certainly showing up in that number the the rest of I'd call you of 100 and the first 1 on 20% of that growth is pretty evenly split between industry growth, which we certainly participate in and the other half of that is coming from our our growth of the organic initiatives taking share in all.
The other things that we do really well.
When you think about the pricing impact of that it sits somewhere inside of that organic would tell you it's somewhere in that about 20% of that half of the first 120%.
Which I'm certainly contributes to our store growth is something we're able to pass through of pretty effectively as we've talked about on previous calls and in.
The FERC with from an inflationary environment and I think that extends through the entire supply chain, but somehow.
Sort of have something rely on we really rely on our our execution of our ability to take that share of continue our organic growth.
The labor on these numbers.
So the sorry, 20% of that half of which is organic because that is that the right way to think about it for pricing.
I'd say at the 22000 basis points is how we think about that got it got it.
Great.
Okay.
Right.
And just following up on Bretts question.
I you know the operating margins above the 9%.
Margins above 20 really impressive, particularly.
But some of that raw material inflation.
Even though the 120 <unk> hundred and 30 basis points up year over year for the full year. It would still imply lower margins kind of year over year on the back half. So just wondering if there is conservatism.
As we think about the back half of the year or.
Give me something else going on.
Just trying to pull on on on that strength and how should we think about margins both sequentially and year over year for the back half of the year. Thanks.
Thanks, Dan It's Jake again, you know, we we think about the margins as we continue the trend through this year is the consistency of the execution of it we've been able to perform in a pretty dynamic.
The main environment as well as the labor of the war for labor, particularly here in the northwest, Indiana as well as around the country as you can see it's headline news on.
It continues to this day and our ability to keep our our hands firmly around the debt.
The rudder on that kind of the kind of work I would tell you that.
We continue to invest in our business.
And the use those opportunities to drive incremental margin and is the drop efficiencies and use that to manage our some of that labor constraint that we have but.
When it comes for the rest of the year I would tell you that what youre seeing in these quarters of the kind of the kind of returns we expect to replicate as we move on and expect to have the chin the bar on that on.
The 30 basis.
At this point the expansion over of over 2020 of the attention.
Okay, and lastly, just a clarification for.
Cash flow from ops, 300 million, and then $50 million to $55 million of free cash of does the expectation for the year.
That's accurate.
1 thing, we mentioned a little bit and I spoke to on the prepared.
It marks and it's something we see a little bit of occasionally as the quarters roll on and off as the timing of some working capital just we're a month ends come in that you can see we mentioned in the 2 days immediately preceding the closing of the books would put another $26 million of cash on the balance sheet that would have otherwise flow into our cash flow from ops and we expect that.
The normalize a little.
For for every year, so we feel pretty good about the 300 million dollar number.
Yeah, and that's a you know of free cash flow per.
Yields getting up towards the mid teens lastly, just in terms of capital allocation you bought back a few shares this quarter I know growth is obviously first and foremost in your mind, but.
The better for them, given where the stock is today relative to the cash flow.
Just your thoughts around maybe being more aggressive in terms of investing in your own shares as well as.
In organic initiatives, thanks again for the color.
Thanks, Dan This is Jake once once again as you know we continue to be very focused on our capital allocation.
And we think it's pretty balanced between everything from our dividend policy to our acquisition strategy and of course of reinvestment of our shares as you mentioned.
The this past quarter, we had we continue to be opportunistic as we evaluate where the where the opportunity may lie in bringing some of the shares and certainly with some of the volatility we saw presented of pretty good opportunity for us to invest in the business.
That's a good investment for us as well as continuing to plow money into our capital allocation for these great buys that we had in the quarter to include the alpha and hyper for them or the C Tech product, which obviously hopefully folks that from time to take a look at those in couple of ways impressed as we have been with there are not only the acquisition, but the performance.
Very good appreciate the color of follow up later thanks.
Thanks, Dan.
Thank you our next questions come from the line of Scott Stemper, but C. L. King. Please proceed with your questions.
Good morning, guys. Thanks for taking my questions Congrats on a great quarter and congrats to Jeff.
Thank you Mike.
Jeff you talked about I guess expectations for retail growth for this year of I think he might have made some.
Broad comments for next year, but could you you know when looking at the recreation business, whether it's the RV or marine I know, there's a lots of puts and takes and tough comparisons but how are.
You look at 'twenty, 2 just from a perspective of growth versus being flat versus potentially being down.
And he got at retail.
Yeah. Thanks.
We still feel very optimistic about where things are headed we see it right now in today's business.
We really feel the combination of.
We're wholesale is against where retail is going into 2022.
Really gives us a pretty long runway for the restock of the dealers.
Taking quite a bit longer than we thought and you know the continued.
If you look there is.
Retail demand out there and it's.
It's strong throughout the country. So.
We're very optimistic about where things are headed for the rest of this year and into 2022.
This is Andy I'll, just add a little bit to that you know our channel checks between.
Inspiration business on.
Guidance with our financing partners in there.
Well the discussion with the Oes are continue to indicate indicate that theres been no tail off in retail demand out there in fact, the quality of the buyers we've heard of or have <unk>.
Proved as it relates to those coming on to lots and and really looking to buy and so versus just kind of kicking the tires. So from our perspective, you know, there's there's definitely a lot of demand out.
<unk>.
The inventory is certainly are in a very very low point.
We think this carries for for quite some time, and we're very optimistic about where retail side of it.
Got it and then lastly, just touching base on the non recreation businesses industrial can you talk about residential versus nonresidential.
How that performed in the quarter on the MH, maybe just talk about some of the retail demand that you're seeing just.
How that shapes up for the rest of the year. Thanks.
Sure. This is Andy again on the the residential nonresidential side I think we're seeing tremendous strength there as well.
They're in residential housing, especially on the single family and multifamily was very very strong during the quarter, we're seeing a little bit of a shift on the high rise over to multifamily and to do that single family side of the business certainly given COVID-19 and the remote opportunities that are out there today, but it still points towards a strong demand in our business model across that platform.
And then when you look at the MH business.
It certainly feels like and looks like we've unlocked some capacity as it relates to the.
The MH manufacturer's ability to increase production I think we're getting our arms around you know the.
The labor scenario and so things are coming back to normal on where we're very encouraged by what we're seeing on the MH side of the business.
The uptick that we've seen in production capacities out there. So yeah no no warning signs on either 1 of those fronts.
Perfect. Thanks again.
Thank you.
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And we have no further questions at this time I'll now turn the call back over to MS. Julie Ann Kotowski for further remarks.
Thanks, Darryl we appreciate everyone for being on the call today and look forward to talking to you again at our third quarter 2021 conference call.
A replay of today's call will be archived on Patrick's website Www Dot Patrick.
And Andy Dot Com under Investor Relations now I'll turn the call back over to our operator.
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