Q2 2024 Patrick Industries Inc Earnings Call

Good morning, ladies and gentlemen, and welcome to Patrick Industries' second quarter 2024 earnings conference call. My name is Rob, and I'll be your operator for today's call.

Operator: 2020-24 earnings conference call.

Operator: This is a 24-hour earnings conference call. My name is Rob, and I'll be your operator for today's call.

Operator: My name is Rob, and I'll be your operator for today's call. At this time, all participants are in listen-only mode.

Operator: At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone should 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 Mr. Steve OHara, Vice President of Investor Relations. Mr. OHara, you may now begin.

Operator: The question and answer session will follow the formal presentation.

Speaker Change: At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation.

Operator: If anyone should acquire operator assistance through the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded.

If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded.

Steve O'hara: And I will now turn the call over to Mr. Steve O'Hara, Vice President of Invest Relations. Mr. O'Hara, you may now begin.

Steve OHara: And I will now turn the call over to Mr. Steve OHara, Vice President of Investor Relations.

Steve O'hara: Good morning, everyone. Welcome to our call this morning. I'm joined in the call today by Andy Nemeth, CEO, Jeffrey Dino, President RV, and Andy Raider, CFO.

Steve OHara: Good morning, everyone. Welcome to our call this morning. I'm joined on the call today by Andy Nemeth, CEO; Jeff Rodino, President RV; and Andy Roeder, CFO. Certain statements made in today's conference call regarding Patrick Industries and its operations may be considered forward-looking statements under the securities laws. The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Additional factors that could cause the results to differ materially from those described in the forward-looking statements can be found in the company's annual report on Form 10-K for the year ended December 31st, 2023, and the company's other filings with the Securities and Exchange Commission. I would now like to turn the call over to Andy Nemeth.

Speaker Change: Mr. OHara, you may now begin.

Speaker Change: Good morning, everyone. Welcome to our call this morning. I'm joined on the call today by Andy Nemeth, CEO , Jeff Rodino, President, RV, and Andy Roeder, CFO . Certain statements made in today's conference call regarding Patrick Industries and its operations

Steve O'hara: Certain statements made in today's conference call regarding Patrick Industries and its operations may be considered forward-looking statements under the securities laws. The company undertakes no obligation to publicly update any for looking statement, whether as a result of new information, future events, or otherwise. Additional factors that could cause the result to differ materially from those described in the forward-looking statements can be found in the company's annual report on Form 10-K for the year ended December 31st, 2023, and the company's other filings with the Securities and Exchange Commission.

Speaker Change: may be considered forward-looking statements under the securities laws.

Steve OHara: The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.

Speaker Change: Additional factors that could cause the results to differ materially from those described in the forward-looking statements can be found in the company's annual report on Form 10-K for the year ended December 31st, 2023, and the company's other filings with the Securities and Exchange Commission. I would now like to turn the call over to Andy Nemeth.

Andy Nemeth: I would now like to turn the call over to Andy Nemeth. Thank you, Steve. Good morning, everyone. And thank you for joining us on the call today. Our second quarter and first half performance continue to be a reflection of the incredible dedication and commitment of our team members in our Better Together culture. Our diversified business model, highly variable cost structure, strong balance sheet, and liquidity position complement with our increasing focus on delivering the best customer service and innovative quality product solutions continue to put us in a position of strength as we navigate current market conditions.

Andy Nemeth: Thank you, Steve. Good morning, everyone, and thank you for joining us on the call today. Our second quarter and first half performance continue to be a reflection of the incredible dedication and commitment of our team members in our Better Together culture. Our diversified business model, highly variable cost structure, strong balance sheet, and liquidity position, in conjunction with our increasing focus on delivering the best customer service and innovative quality product solutions, continue to put us in a position of strength as we navigate current market conditions.

Andy Nemeth: Thank you, Steve. Good morning, everyone, and thank you for joining us on the call today.

Andy Nemeth: Our second quarter and first half performance continue to be a reflection of the incredible dedication and commitment of our team members in our Better Together culture.

Andy Nemeth: Our diversified business model, highly variable cost structure, strong balance sheet, and liquidity position in complement with our increasing focus on delivering the best customer service and innovative quality product solutions continue to put us in a position of strength as we navigate current market conditions.

Andy Nemeth: In both Q2 and the first half of 2024, we delivered increased revenue, operating in EBITDA margins and earnings year over year, despite persistent volatility in our end markets. Our second quarter revenues increased 10% to approximately 1.02 billion. And on a trailing 12-month basis, our consolidated revenues were approximately 3.6 billion. Net income in the second quarter improved 13% to 48 million, with earnings per diluted share of $2.16. Our adjusted EBITDA grew by 14% to 130 million, with adjusted EBITDA margin expanding 40 basis points to 12.8%. As we look to the back half of the year, based on our detailed analytics and recent commentary from leading ODMs in our end markets, we are now anticipating that strict inventory discipline will continue across our markets.

Andy Nemeth: In both Q2 and the first half of 2024, we delivered increased revenue, operating EBITDA margins, and earnings year-over-year despite persistent volatility in our end market. Our second quarter revenues increased 10% to approximately $1.02 billion. And on a trailing 12-month basis, our consolidated revenues were approximately $3.6 billion. Net income in the second quarter improved 13% to $48 million, with earnings per diluted share of $2.16.

Andy Nemeth: In both Q2 and the first half of 2024, we delivered increased revenue, operating in EBITDA margins, and earnings year-over-year despite persistent volatility in our end markets.

Andy Nemeth: Our second quarter revenues increased 10% to approximately $1.02 billion, and on a trailing 12-month basis, our consolidated revenues were approximately $3.6 billion.

Andy Nemeth: Net income in the second quarter improved 13% to $48 million, with earnings per diluted share of $2.16.

Andy Nemeth: Our adjusted EBITDA grew by 14% to $130 million, with the adjusted EBITDA margin expanding 40 basis points to 12.8%. As we look to the back half of the year, based on our detailed analytics and recent commentary from leading OEMs in our end markets, we are now anticipating that strict inventory discipline will continue across our markets, both at the OEM and dealer levels, until more certainty is achieved as a result of the interest rate environment.

Andy Nemeth: Our adjusted EBITDA grew by 14% to $130 million with adjusted EBITDA margin expanding 40 basis points to 12.8%.

Andy Nemeth: As we look to the back half of the year, based on our detailed analytics and recent commentary from leading OEMs in our end markets, we are now anticipating that strict inventory discipline will continue across our markets, both at the OEM and dealer levels, until more certainty is achieved as a result of the interest rate environment.

Andy Nemeth: Both at the OEM and dealer levels until more certainty is achieved as a result of the interest rate environment. Jeff and Andy will provide a more in-depth discussion on this later in the call.

Andy Nemeth: Jeff and Andy will provide a more in-depth discussion on this later in the call, but I want to highlight three key longer-term themes that are foundational to Patrick as we enter the second half of the year. First, our business is more resilient and nimble, with higher potential revenue, margins, and earnings power, as a result of the strategic diversification investments and cost management efforts we have made in each of our markets. For instance, in the first half of the year, stronger demand from the RV and housing markets helped offset lower revenue from our marine market.

Speaker Change: Jeff and Andy will provide a more in-depth discussion on this later in the call. However, I want to highlight three key longer-term themes that are foundational to Patrick as we enter the second half of the year.

Andy Nemeth: However, I want to highlight three key longer-term themes that are foundational to Patrick as we enter the second half of the year. First, our business is more resilient and nimble, with higher potential revenue margins and earnings power as a result of the strategic diversification investments and cost management efforts we have made in each of our markets. For instance, in the first half of the year, stronger demand from the RV and housing markets helped offset lower revenue from our marine market. Furthermore, a recent expansion in the power sports market through the margin of creative sport tech acquisition is outperforming our initial expectations and has already yielded positive results.

Andy Nemeth: First, our business is more resilient and nimble with higher potential revenue, margins, and earnings power as a result of the strategic diversification investments and cost management efforts we have made in each of our markets.

Andy Nemeth: For instance, in the first half of the year, stronger demand from the RV and housing markets helped offset lower revenue from our marine market.

Andy Nemeth: Furthermore, a recent expansion in the power sports market through the Margin of Creative Sport Tech acquisition is outperforming our initial expectations and has already yielded positive results. Today, our RV business represents 44% of our total revenue, which is down from approximately 74% just 10 years ago, despite the fact that RV revenue has grown at a 12% CAGR since 2014. In 2019, RV represented 55% of our total revenue, and despite RV wholesale shipments being almost 20% lower in the current TTM period, RV revenue has increased at a 5% CAGR since then.

Andy Nemeth: Furthermore, a recent expansion in the power sports market through the Margin of Creative Sport Tech acquisition is outperforming our initial expectations and has already yielded positive results.

Andy Nemeth: Today, our RV business represents 44% of our total revenue, which is down from approximately 74% to 10 years ago, despite the fact that RV revenue has grown at a 12% CAGR since 2014. We've recently prioritized a near and long-term innovation through our recently launched Advanced Product Group. This initiative is enhancing our ability to bring value-added product solutions and services to our customers across our businesses. As an example in our marine market, we recently began production and launched Gear Glass, a premium-glass windshield solution debuting in the skin-wake market. With powerboat industry-wide potential, this further enhances our offering of a full suite of windshield solutions for our customers.

Andy Nemeth: Today our RV business represents 44% of our total revenue, which is down from approximately 74% just 10 years ago, despite the fact that RV revenue has grown at a 12% CAGR since 2014.

Andy Nemeth: We are intensely prioritizing near and long-term innovation through our recently launched advanced products. This initiative is enhancing our ability to bring value-added product solutions and services to our customers across our business. As an example, in our marine market, we recently began production on and launched Gear Glass, a premium glass windshield solution debuting in the ski and wake market.

Andy Nemeth: As an example, in our marine market, we recently began production and launched Gear Glass, a premium glass windshield solution debuting in the ski and wake market.

Andy Nemeth: With PowerBoat's industry-wide potential, this further enhances our offering of a full suite of windshield solutions for our customers. With the incredible network of brands in our portfolio and in alignment with our Better Together initiatives to synergize our product power and solutions model, our business leaders now possess better visibility and ability to communicate, collaborate, and coordinate best practices with each other across our environment. And third, acquisitions have been and will continue to be a key component of our strategic growth.

Andy Nemeth: With the incredible network of brands in our portfolio and in alignment with our better-to-getter initiatives to synergize our product power and solutions model, our business leaders now possess better visibility and ability to communicate, collaborate, and coordinate best practices with each other across our end markets.

Andy Nemeth: With the incredible network of brands in our portfolio and in alignment with our Better Together initiatives to synergize our product power and solutions model, our business leaders now possess better visibility and ability to communicate, collaborate, and coordinate best practices with each other across our end markets.

Andy Nemeth: In third, acquisitions have been and will continue to be a key component of our strategic growth plan. Our pipeline remains robust, and we are consistently cultivating and evaluating deals both large and small, with the intent of continuing to execute on the model that has helped us produce our slow and steady, consistent margin improvement. The acquisitions we have completed over the past 15 years have accelerated our growth and enhanced our margin profile. Expanded the breadth of our product offerings to deliver full solutions, introduced us to new customers deep into existing relationships, and brought tremendous talent to our organization.

Andy Nemeth: And third, acquisitions have been and will continue to be a key component of our strategic growth plan.

Andy Nemeth: Our pipeline remains robust, and we are consistently cultivating and evaluating deals, both large and small, with the intent of continuing to execute on the model that has helped us produce our slow and steady consistent margin improvement. The acquisitions we have completed over the past 15 years have accelerated our growth and enhanced our margin profile. We have expanded the breadth of our product offerings to deliver full solutions, introduced us to new customers, deepened existing relationships, and brought tremendous talent to our organization.

Andy Nemeth: Our pipeline remains robust, and we are consistently cultivating and evaluating deals, both large and small, with the intent of continuing to execute on the model that has helped us produce our slow and steady consistent margin improvement.

Andy Nemeth: The acquisitions we have completed over the past 15 years have accelerated our growth and enhanced our margin profile.

Andy Nemeth: Our resilient financial performance and prudent inventory management has enabled us to maintain a strong balance sheet. With no major debt maturities until 2027 and available liquidity of 519 million, we remain poised to allocate capital as advantageous opportunities present themselves. Our strong free cash flow generation has positioned us to reduce debt, invest in growth opportunities, all while returning cash to shareholders through dividends and opportunistic share repurchases. In anticipation of a cautious and disciplined third and fourth quarters, and the expectation of improving tailwinds in fiscal 2025, our team will continue to aggressively control and leverage our highly variable cost structure without impacting the integrity of the business model.

Andy Nemeth: Responsive financial performance and prudent inventory management has enabled us to maintain a strong balance. With no major debt maturities until 2027 and available liquidity of $519 million, we remain poised to allocate capital as advantageous opportunities present themselves. Our strong free cash flow generation has positioned us to reduce debt, invest in growth opportunities, all while returning cash to shareholders through dividends and opportunistic share repurchase. In anticipation of a cautious and disciplined third and fourth quarters and the expectation of improving tailwinds in fiscal 2025, our team will continue to aggressively control and leverage our highly variable cost structure without impacting the integrity of the business model, while supporting and servicing our customers at the I'll now turn the call over to Jeff, who will highlight the quarter and provide more detail on our end market.

Andy Nemeth: Our resilient financial performance and prudent inventory management has enabled us to maintain a strong balance sheet.

Andy Nemeth: Our strong free cash flow generation has positioned us to reduce debt, invest in growth opportunities, all while returning cash to shareholders through dividends and opportunistic share repurchases.

Andy Nemeth: In anticipation of a cautious and disciplined third and fourth quarters, and the expectation of improving tailwinds in fiscal 2025, our team will continue to aggressively control and leverage our highly variable cost structure without impacting the integrity of the business model.

Andy Nemeth: While supporting and servicing our customers at the highest level and retaining our ability to minimally react to positive changes in demand.

Jeff: I'll now turn the call over to Jeff, who will highlight the quarter and provide more detail on our end markets. Thanks, Andy, and good morning everyone. As Andy noted, demand across all primary and markets remains constrained by high interest rates and inflation. OEMs continue to aggressively manage their production levels to tightly balance the level and cost of inventory in the channel. Our strategic diversification worked as intended in the first half of the year, with RV and housing revenue growth more than offsetting decline in the marine revenue. When combined with our team's tactical approach to managing our cost structure, these factors contributed to the year-over-year growth in revenue and earnings.

Jeffrey Rodino: Thanks Andy and good morning everyone. As Andy noted, demand across all primary and secondary markets remains constrained by high interest rates and inflation. OEMs continue to aggressively manage their production levels to tightly balance the level and cost of inventory in the channel. Our strategic diversification worked as intended in the first half of the year.

Andy Nemeth: Thanks, Andy, and good morning, everyone. As Andy noted, demand across all primary and markets remains constrained by high interest rates and inflation.

Speaker Change: Our strategic diversification worked as intended in the first half of the year, with RV and housing revenue growth more than offsetting decline in the marine revenue.

Jeffrey Rodino: With RV and housing revenue growth more than offsetting a decline in marine revenue, when combined with our team's tactical approach to managing our cost structure, these factors contributed to year-over-year growth in revenue and earnings. As a solution supplier to the outdoor enthusiast and housing markets, we recognize that we cannot directly influence consumer demand, and our team remains focused on what is in our control and will continue to actively scale our business to match.

Speaker Change: When combined with our team's tactical approach to managing our cost structure, these factors contributed to the year-over-year growth in revenue and earnings.

Jeff: As a solution supplier to the outdoor enthusiast in housing markets, we recognize that we cannot directly influence consumer demand, and our team remains focused on what it is in our control and will continue to actively scale our business to match. This is $4,966 off, about 2% from the same period last year. However, for the second quarter in a row, RV content for unit on a TTM basis increased sequentially, rising 2% versus the first quarter of 2024. RV wholesale shipments increased 7% in the quarter, with lower end tables leading the way. Motorized unit shipments were down in the quarter, and higher priced table increased at a modest pace.

Jeffrey Rodino: We remain well positioned to capitalize on potential recovery given our focus on innovation, customer service, and our differentiated good, better, best value proposition. Our second quarter RV revenues were $450 million, increasing 17% compared to the same period in 2023 and representing 44% of consolidated revenue. RV content per unit on a TTM basis was $4,966, off about 2% from the same period last year. However, for the second quarter in a row, RV content per unit on a TTM basis increased sequentially, rising 2% versus the first quarter of 2024. RV Wholesale shipments increased 7% in the quarter, with lower-end towables leading the way.

Jeffrey Rodino: Motorized unit shipments were down in the quarter, and higher-priced towables increased at a modest pace. We estimate total RV retail unit shipments decreased approximately 10% in the quarter, resulting in an estimated 18 to 20 weeks on hand versus historical 26 to 30 weeks on hand. While current weeks on hand are well below historical levels, we believe dealers will continue to focus on destocking inventory in the third quarter until retail velocity improves or floor plan interest rates come down.

Jeff: We estimate total RV retail unit shipments decreased approximately 10% in the quarter, resulting in an estimated 18 to 20 weeks on hand versus historical 26 to 30 weeks on hand. Well, current weeks on hand is well below historical levels. We believe dealers will continue to focus on destocking inventory in the third quarter until retail velocity improves or floor plant interest rates come down. Our second quarter marine revenues were 158 million, off 30% from the prior year, representing 16% of consolidated sales. Our estimated marine content for wholesale unit on a TTM basis was $3,935, down 10% from the same period last year and approximately 2% from the first quarter of 2024, primarily reflecting pricing, giving back to customers, and product mix.

Speaker Change: While current weeks on hand is well below historical levels, we believe dealers will continue to focus on destocking inventory in the third quarter until retail velocity improves or floor plan interest rates come down.

Jeffrey Rodino: Our second quarter marine revenues were $158 million, off 30% from the prior year, representing 16% of consolidated sales. Our estimated marine content for wholesale units on a TTM basis was $3,935, down 10% from the same period last year and approximately 2% from the first quarter of 2024, primarily reflecting pricing given back to customers and product. As we've discussed, we are more heavily indexed towards higher-engineered, ski-and-wake, and pontoon categories, which we estimate were down approximately 57 and 36 percent, respectively, in the second quarter, and 55 percent and 39 percent, respectively, year-to-date.

Speaker Change: Our second quarter marine revenues were 158 million off 30% from the prior year representing 16% of consolidated sales.

Jeff: As we've discussed, we are more heavily indexed towards higher engineered skin, wake, and pontoon categories, which we estimate were down approximately 57% and 36%, respectively, in the second quarter and 55% and 39%, respectively, year to date.

Jeff: As a reminder, prior to the first quarter, we reported power sports revenue in our marine market. We have restated our content for unit numbers and the current and prior years' figures to reflect these adjustments for modeling purposes.

Jeffrey Rodino: As a reminder, prior to the first quarter, we reported power sports revenue in our marine market. We have restated our content per unit numbers and the current and prior year's figures to reflect these adjustments. For modeling purposes, you can find our 2023 revenues by end market in our earnings slide deck. We estimate in the quarter retail and wholesale power board unit shipments were 68,400 and 39,300 units, respectively, implying an inventory reduction of approximately 29,100 units. We estimate weeks on hand will drop to 23 to 25 weeks at the end of the quarter, which is well below the historical 36 to 40 weeks.

Jeff: You can find our 2023 revenues by end market and our earnings slide deck. We estimate in the quarter retail and wholesale power board unit shipments were 68,400 and 39,300 units, respectively, employing the inventory reduction of approximately 29,100 units. We estimate weeks on hand dropped to 23 to 25 weeks at the end of the quarter, which is well below the historical 36 to 40 weeks. All interest rates remain near-term headwinds. We are encouraged by the incredible discipline exhibited by our partners in our RV and marine end markets, which we believe will accelerate the need to restock when demand recovers.

Speaker Change: For modeling purposes, you can find our 2023 revenues by end market in our earnings slide deck.

Jeffrey Rodino: While interest rates remain near-term headwinds, we are encouraged by the incredible discipline exhibited by our partners in our RV and marine end markets, which we believe will accelerate the need to restock when demand recovers. As noted, partially offsetting the decline in our marine-related businesses, our housing revenue was up 11% to $305 million, representing 30% of consolidated sales. In manufactured housing, which represents approximately 57% of our housing revenue, in the quarter, our estimated content per unit on a TTM basis increased 1% year-over-year to $6,427 and was up slightly sequentially.

Speaker Change: While interest rates remain near-term headwinds, we are encouraged by the incredible discipline exhibited by our partners in our RV and marine end markets.

Jeff: As noted, partially offsetting the decline in our marine-related businesses, our housing revenue was up 11% to 305 million, representing 30% of consolidated sales. In manufactured housing, which represents approximately 57% of our housing revenue in the quarter, our estimated content per unit on a TTM base has increased 1% year over year to $6,427 and was up slightly sequentially. We have a stable housing market. MH shipments increased 19% in the quarter, and total housing starts declined 7%, with single family housing starts up 7% and multi family down 34%. Single-family housing represents 75% of total new housing starts in the quarter.

Speaker Change: As noted, partially offsetting the decline in our marine-related businesses, our housing revenue was up 11% to $305 million, representing 30% of consolidated sales.

Jeffrey Rodino: Demand for affordable housing remains strong, and while supply is still limited, high interest rates continue to impact consumers' ability to purchase and willingness to sell, leading to a low-velocity but stable housing market. MHU shipments increased 19% in the quarter, and total housing starts declined 7%, with single-family housing starts up 7% and multi-family down 34%. Single-family housing represents 75% of total new housing starts in the quarter.

Speaker Change: MHU shipments increased 19% in the quarter and total housing starts declined 7% with single-family housing starts up 7% and multi-family down 34%.

Speaker Change: Single-family housing represents 75% of total new housing starts in the quarter.

Jeff: Our power sports revenues were 104 million in the quarter, representing 10% of our second quarter 2024 consolidated sales. Our power sports business has primarily centered around side-by-side golf cart and motorcycle sectors of the industry, with an emphasis on the utility segment of the market. The utility segment has remained resilient with balanced inventory levels, and our backlogs have remained stable, while the recreation side of the market has been volatile with elevated inventory levels. As noted, sports have continued to deliver better-than-expected results both in the quarter and year to date due to continued solid demand for their products.

Andrew Roeder: Our Parsports revenues were $104 million in the quarter, representing 10% of our second quarter 2024 consolidated sales. The PAR Sports business is primarily centered around the side-by-side, golf cart, and motorcycle sectors of the industry, with an emphasis on the utility segment of the market. The utility segment has remained resilient with balanced inventory levels, and our backlogs have remained stable, while the recreation side of the market has been volatile with elevated inventory levels. As noted, Sport-Tex has continued to deliver better than expected results, both in the quarter and year to date, due to continued solid demand for their products.

Speaker Change: Our Parsports revenues were $104 million in the quarter, representing 10% of our second quarter 2024 consolidated sales.

Speaker Change: Our par sports business is primarily centered around side-by-side, golf cart, and motorcycle sectors of the industry.

Speaker Change: The utility segment has remained resilient with balanced inventory levels and our backlogs have remained stable while the recreation side of the market has been volatile with elevated inventory levels.

Jeff: We expect the sports have will continue to be an organic and strategic platform for future growth and power sports. On the innovation front, the advanced product group which Andy referred to is continuing to gain momentum with our businesses while deepening collaboration between us and our OEM partners, as evidenced by the introduction of our proprietary RV composite component solutions during the quarter. Composites offer a more sustainable solution and positive benefits, including durability, supply chain reliability, and weight savings, while improving production efficiencies for us and our valued customers. The new composite components are extremely versatile and can be used for numerous applications both on the interior and exterior of RVs, as well as in combination with our other products in our portfolio.

Andrew Roeder: We expect that SporTech will continue to be an organic and strategic platform for future growth in power sports. On the innovation front, the Advanced Product Group, which Andy referred to, is continuing to gain momentum with our businesses while deepening collaboration between us and our OEM partners, as evidenced by the introduction of our proprietary RV composite component solutions during the quarter. Composites offer a more sustainable solution and positive benefits, including durability, supply chain reliability, and weight savings, while improving production efficiencies for us and our valued customers.

Speaker Change: We expect that Sportec will continue to be an organic and strategic platform for future growth in power sports.

Speaker Change: On the innovation front, the Advanced Product Group, which Andy referred to, is continuing to gain momentum with our businesses while deepening collaboration between us and our OEM partners.

Andy Nemeth: as evidenced by the introduction of our proprietary RV composite component solutions during the quarter.

Andrew Roeder: The new composite components are extremely versatile and can be used for numerous applications both on the interior and exterior of RVs, as well as in combination with our other products in our portfolio. This allows us to tap into areas of content that were previously underrepresented and provides us with the opportunity to capture significant potential revenue over the long term, staying on the RV side of our business. This quarter, we began the exclusive distribution of Tal-Glas, a new low-profile RV antenna, which eliminates the need for bulky antenna installation, greatly improves connectivity options, and offers a sleek, minimalistic design favored by RVers.

Speaker Change: The new composite components are extremely versatile and can be used for numerous applications both on the interior and exterior of RVs, as well as in combination with our other products in our portfolio.

Jeff: This allows us to tap into areas of content where previously underrepresented and provides us the opportunity to capture significant potential revenue over the long term.

Speaker Change: This allows us to tap into areas of content that were previously underrepresented and provides us the opportunity to capture significant potential revenue over the long term.

Jeff: Staying on the RV side of our business. This quarter we have began the exclusive distribution of tile glass, a new low profile RV antenna which eliminates the need for bulky antenna installations, greatly improves connectivity options, and offers a sleek minimalistic design favored by RVers. On the marine side of the business, as Andy discussed earlier, we recently introduced gear glass to the market. This is a fully integrated windshield system that includes frame, stanchions, integrated lighting, hinging, and mirror systems. Gearmurys' pre-existing infrastructure, highly automated production capabilities, and use of cutting-edge technology enable advanced designs that are more difficult for others to replicate.

Speaker Change: This quarter, we have began the exclusive distribution of TalGlass, a new low-profile RV antenna which eliminates the need for bulky antenna installations, greatly improves connectivity options and offers a sleek, minimalistic design favored by RVers.

Andrew Roeder: On the marine side of the business, as Andy discussed earlier, we recently introduced gear glass to the market. This is a fully integrated windshield system that includes frame, stanchions, integrated lighting, hinging, and mirror system. Guillenbury's pre-existing infrastructure, highly automated production capabilities, and use of cutting-edge technology enable advanced designs that are more difficult for others to replicate. We recently launched production with a small group of customers but estimate the total addressable market for this solution is well over 100 million. I'll now turn the call over to Andy Roeder, who will provide additional comments on our financial performance.

Speaker Change: This is a fully integrated windshield system that includes frame, stanchions, integrated lighting, hinging and mirror systems.

Jeff: We recently launched production with a small group of customers, but estimate the total addressable market for this solution is well over 100 million.

Speaker Change: We recently launched production with a small group of customers, but estimate the total addressable market for this solution is well over $100 million.

Andy Raider: I'll now turn the call over to Andy Raider, who will provide additional comments on our financial performance. Thanks, Jeff, and good morning, everybody. I've enjoyed my first full quarter working at Patrick and have been focused on immersing myself in the business, deepening and enhancing my relationships, and supporting our teams. Moving to our financial results. Our consolidated second quarter net sales increased 10% to $1.02 billion driven by revenue growth of 17% in our RV market and 11% in housing, coupled with better-than-expected results in power sports related to the sport tech acquisition. Together, these factors more than offset the impact of a 30% decline in marine revenue during the period.

Andy Roeder: I'll now turn the call over to Andy Roeder, who will provide additional comments on our financial performance.

Andrew Roeder: Thanks Jeff and good morning everybody. I've enjoyed my first full quarter working for Patrick and have been focused on immersing myself in the business, deepening and enhancing my relationships, and supporting our team. Moving to our financial results, our consolidated second quarter net sales increased 10% to $1.02 billion, driven by revenue growth of 17% in our RV market and 11% in housing, coupled with better-than-expected results in power sports related to the Sportec acquisition. Together, these factors more than offset the impact of a 30% decline in marine revenue during the period.

Andy Roeder: Thanks Jeff and good morning everybody. I've enjoyed my first full quarter working at Patrick and have been focused on immersing myself in the business, deepening and enhancing my relationships, and supporting our teams.

Andrew Roeder: Our ability to actively control costs and effectively manage our production and labor was evident in the quarter. Gross profit increased 10% to $231 million, and gross margin was 22.8% during the period, consistent with last year. SG&A expenses increased $5 million, or 6%, to $84 million in the second quarter of 2024, primarily as a result of our acquisitions year-over-year that decreased 30 basis points as a percent of sales. Total operating expenses increased 9% to $147 million in the quarter. Amortization expense increased 22% related to the acquisition of Sportec in the first quarter of 2024.

Speaker Change: Moving to our financial results.

Speaker Change: Our consolidated second quarter net sales increased 10% to 1.02 billion dollars, driven by revenue growth of 17% in our RV market and 11% in housing.

Speaker Change: coupled with better-than-expected results in power sports related to the Sportec acquisition. Together, these factors more than offset the impact of a 30% decline in marine revenue during the period.

Andy Raider: Our ability to actively control costs and effectively manage our production and labor was evident in the quarter. Gross profit increased 10% to 230% of the total $31 million, and gross margin was 22.8% during the period, consistent with last year. SG&A expenses increased 5 million or 6% to $84 million in the second quarter of 2024. Primarily, as a result of our acquisitions year over year, the decreased 30 basis points as a percent of sales. Total operating expenses increased 9% to $147 million in the quarter. Emeritization expense increased 22% related to the acquisition of Sport Tech in the first quarter of 2024.

Speaker Change: Total operating expenses increased 9% to $147 million in the quarter. Amortization expense increased 22% related to the acquisition of Sportec in the first quarter of 2024.

Andy Raider: Operating income grew 9 million or 12% to $85 million, while operating margin improved 10 basis points to 8.3%. The improvement in operating margin reflected stronger revenue from our RV and housing businesses, again representing successful efforts to diversify our business mix. This was partially offset by higher amortization, as noted earlier, which increased 20 basis points as a percentage of sales from the second quarter of 2023, and lower revenue from our marine businesses, which tend to be higher margin with a higher fixed cost profile. Net income increased 13% to $48 million, or $2.16 per diluted share. Our EPS for the second quarter of 2024 includes approximately 3 cents per share in additional accounting-related dilution from our 2028 convertible notes as a result of the increase in our stock price.

Andrew Roeder: Operating income grew 9 million, or 12%, to $85 million, while operating margin improved 10 basis points to 8.3%. The improvement in operating margin reflected stronger revenue from our RV and housing businesses, again, representing successful efforts to diversify our business mix. This was partially offset by higher amortization, as noted earlier, which increased 20 basis points as a percentage of sales from the second quarter of 2023 and lower revenue from our marine business, which tends to be higher-margin with a higher fixed cost profile.

Andy Roeder: Operating income grew 9 million or 12 percent to 85 million dollars while operating margin improved 10 basis points to 8.3 percent.

Andrew Roeder: Net income increased 13% to $48 million, or $2.16 per diluted share. Our EPS for the second quarter of 2024 includes approximately $0.03 per share in additional accounting-related dilution from our 2028 convertible notes as a result of the increase in our stock price. As noted last quarter, we have hedges in place which are expected to reduce or eliminate any potential dilution to the company's common stock upon any conversion of the convertible notes and or offset any cash payments the company is required to make in excess of the principal amount of any converted notes. For reporting purposes, these hedges are always anti-dilutive and therefore cannot be included when reporting earnings per share.

Speaker Change: Net income increased 13% to $48 million, or $2.16 per diluted share.

Andy Raider: As noted last quarter, we have hedges in place which are expected to reduce or eliminate any potential dilution to the company's common stock upon any conversion of the convertible notes and/or offset any cash payments the company is required to make in excess of the principal amount of any converted notes. For reporting purposes, these hedges are always anti-dilutive and therefore cannot be included when reporting earnings per share. Adjusted EBITDA through 14% to $130 million versus $114 million last year. Adjusted EBITDA margin expanded 40 basis points to 12.8% for the second quarter of 2024. Our overall effective tax rate was 25.6% for the second quarter compared to 26.1% in the prior year.

Speaker Change: As noted last quarter, we have hedges in place which are expected to reduce or eliminate any potential dilution to the company's common stock upon any conversion of the convertible notes and or offset any cash payments the company is required to make in excess of the principal amount of any converted notes.

Andrew Roeder: Adjusted EBITDA grew 14% to $130 million versus $114 million last year. Adjusted EBITDA margin expanded 40 basis points to 12.8% for the second quarter of 2024. Our overall effective tax rate was 25.6% for the second quarter, compared to 26.1% in the prior year.

Andy Roeder: Adjusted EBITDA margin expanded 40 basis points to 12.8% for the second quarter of 2024.

Speaker Change: Our overall effective tax rate was 25.6% for the second quarter compared to 26.1% in the prior year. We expect our effective tax rate to be approximately 25-26% for the third and fourth quarters.

Andy Raider: We expect our effective tax rate to be approximately 25 to 26% for the third and fourth quarters. Cash provided by operations for the first six months of 2024 was approximately $173 million compared to $178 million in the prior year period. This quarter, purchases of property, plant, equipment were $17 million, reflecting continued investment in automation and select facility enhancements. Our strategic deployment of capital reinforces our commitment to automation and innovation in creating long-term value for customers and stakeholders. We continue to estimate our 2024 capital expenditures will total $70 to $80 million. Our balance sheet remains solid, and our team continues to make progress on reducing our net leverage toward our target range.

Andrew Roeder: We expect our effective tax rate to be approximately 25-26% for the 3rd and 4th quarters. Cash provided by operations for the first six months of 2024 was approximately $173 million compared to $178 million in the prior year period. This quarter, purchases of property, plant, and equipment were $17 million, reflecting continued investment in automation and select facility enhancement. Our strategic deployment of capital reinforces our commitment to automation and innovation in creating long-term value for customers and stakeholders.

Speaker Change: This quarter, purchases of property, plant, and equipment were $17 million, reflecting continued investment in automation and select facility enhancements.

Andy Roeder: Our strategic deployment of capital reinforces our commitment to automation and innovation in creating long-term value for customers and stakeholders.

Andrew Roeder: We continue to estimate our 2024 capital expenditures will total $70 to $80 million. Our balance sheet remains solid, and our team continues to make progress on reducing our net leverage toward our target range. After repaying $82 million in debt during the quarter, we ended June with a total net leverage ratio of 2.6 times, down from 2.8 at the end of the first quarter and about 2.9 at the time we closed the Sportec acquisition.

Speaker Change: We continue to estimate our 2024 capital expenditures will total $70 to $80 million.

Speaker Change: Our balance sheet remains solid, and our team continues to make progress on reducing our net leverage toward our target range.

Andy Raider: After repaid $82 million in debt during the quarter, we ended June with a total net leverage ratio of 2.6 times, down from 2.8 at the end of the first quarter and about 2.9 at the time we closed the SportTech acquisition. We ended the quarter with total net liquidity of $519 million, comprised of $44 million of cash on hand and unused capacity on a revolving credit facility of $475 million. We plan to remain opportunistic in our capital allocation strategy, with specific focus on acquisitions that complement our existing businesses and expand our presence in our end markets.

Andrew Roeder: We ended the quarter with total net liquidity of $519 million, comprised of $44 million of cash on hand and unused capacity on a revolving credit facility of $475 million. We plan to remain opportunistic in our capital allocation strategy, with specific focus on acquisitions that complement our existing businesses and expand our presence in our end market, maintaining the ability to seize profitable strategic growth opportunities as they arise. We did not repurchase any shares during the quarter. However, we will remain opportunistic on future share repurchases and had $78 million left authorized under our current plan at the end of the second quarter.

Speaker Change: We ended the quarter with total net liquidity of $519 million, comprised of $44 million of cash on hand and unused capacity on a revolving credit facility of $475 million.

Speaker Change: We plan to remain opportunistic in our capital allocation strategy with specific focus on acquisitions that complement our existing businesses and expand our presence in our end markets.

Andy Raider: As we evaluate the strategic growth initiatives, we will balance these with reinvesting our business and returning cash to shareholders. During the quarter, we generated $121 million of free cash flow, and for the trailing 12-month period, we generated $348 million of free cash flow. With no major debt maturities until 2027, we continue to have the balance sheet strength, flexibility, and liquidity to remain on offense, maintaining the ability to seize profitable strategic growth opportunities as they arise. We returned $12 million to shareholders in the form of dividends during the quarter. We did not repurchase any shares during the quarter; however, we will remain opportunistic on future share repurchases and had $78 million left authorized under our current plan at the end of the second quarter.

Speaker Change: During the quarter, we generated $121 million of free cash flow, and for the trailing 12-month period, we generated $348 million of free cash flow.

Speaker Change: With no major debt maturities until 2027, we continue to have the balance sheet strength, flexibility, and liquidity to remain on offense, maintaining the ability to seize profitable strategic growth opportunities as they arise.

Andy Raider: As Andy noted earlier, we are prioritizing strategic opportunities while focusing on reducing our leverage to within our target range of two and a quarter to two and a half times. Moving to our end market outlook, we previously expected a one-for-one retail-wholesale environment for the full year. However, dealers remain extremely cautious, and we now expect our VM marine dealers to focus on maintaining minimum inventory levels in the third quarter and through the end of the year, or until consumer confidence in the rate environment improves. As a result, we are keeping our retail estimates intact, shifting to the lower end of our range, but reducing our wholesale unit shipment estimates for both RV and marine markets.

Speaker Change: As Andy noted earlier, we are prioritizing strategic opportunities while focusing on reducing our leverage to within our target range of two and a quarter to two and a half times.

Andy: Moving to our In-Market Outlook.

Andy: We previously expected a one-for-one retail wholesale environment for the full year. However, dealers remain extremely cautious.

Speaker Change: And we now expect RV and Marine dealers to focus on maintaining minimum inventory levels in the third quarter and through the end of the year, or until consumer confidence and the rate environment improves.

Speaker Change: As a result, we are keeping our retail estimates intact, shifting to the lower end of our range, but reducing our wholesale unit shipment estimates for both RV and marine markets.

Andy Raider: Our full year RV wholesale unit shipment outlook is now 320 to 330,000 units. This represents a reduction at the high end of our previous forecast of 320 to 340,000 units. In Marine, we now expect 2024 industry wholesale unit shipments for our overall product mix will be down 20 to 25%, which is below our first quarter estimate of down 10 to 15%. Similar to RV, we expect full-year industry retail unit shipments to be down toward the lower end of our range, or approximately 10%. At the midpoint, these estimates imply a calendar year dealer inventory reduction of approximately 26,000 RVs and approximately 17,000 boats, suggesting a significant restock opportunity on a recovery and demand or interest rate relief.

Operator: Our full year RV Wholesale Unit Shipment Outlook is now 320,000 to 330,000 units. In marine, we now expect 2024 industry wholesale unit shipments for our overall product mix will be down 20 to 25%, or approximately 10%. At the midpoint, these estimates imply a calendar year dealer inventory reduction of approximately 26,000 RVs and approximately 17,000 boats, suggesting a significant restock opportunity on a recovery in demand or interest rate release. In our power sports end market, our outlook remains unchanged.

Speaker Change: Our full-year RV Wholesale Unit Shipment Outlook is now 320,000 to 330,000 units.

Speaker Change: In Marine, we now expect 2024 industry wholesale unit shipments for our overall product mix will be down 20 to 25 percent.

Speaker Change: suggesting a significant restock opportunity on a recovery in demand or interest rate relief.

Andy Raider: In our power sports in market, our outlook remains unchanged. We estimate power sports unit shipments in our product categories will be flat in 2024, and our organic content will be up mid single digits. In our housing market, we estimate image wholesale unit shipments will be up 5 to 10% for 2024. On the residential housing side of the market, we estimate 2024 total new housing starts will be flat to up 5% versus 2023. The changes in our end market forecast, assuming current content per unit for each end market, imply a revenue reduction of approximately $100 million versus our prior end market outlook.

Speaker Change: In our power sports end market, our outlook remains unchanged.

Andy Roeder: We estimate PowerSports unit shipments in our product categories will be flat in 2024 and our organic content will be up mid-single digits.

Andy Roeder: In our housing market, we estimate MH wholesale unit shipments will be up 5-10% for 2024.

Operator: On the residential housing side of the market, we estimate 2024 total new housing starts will be flat to up 5% versus 2023. Therefore, we now expect operating margins to be flat to up 20 basis points on an adjusted basis for the full year versus 2023.

Andy Roeder: On the residential housing side of the market, we estimate 2024 total new housing starts will be flat to up 5% versus 2023.

Andy Roeder: The changes in our end market forecast, assuming current content per unit for each end market, imply a revenue reduction of approximately $100 million versus our prior end market outlook.

Andy Raider: Therefore, we now expect operating margin to be flat to up 20 basis points on an adjusted basis for the full year versus 2023. We continue to estimate our full year operating cash flow will be $390 to $410 million, implying free cash flow of $310 million or more based on our Catholics estimates.

Andy Raider: That completes my remarks.

Operator: We are now ready for questions.

Speaker Change: That completes my remarks. We are now ready for questions.

Operator: Thank you.

Operator: We'll now be conducting a question and answer session. If you'd like to ask a question today, you may press star 1 from your telephone keypad, and a confirmation tone indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue. For participants that are eating speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please; will we poll for questions. Thank you. Thank you in our first question.

Speaker Change: Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question today, you may press star 1 from your telephone keypad and a confirmation tone will indicate your line is in the question queue.

Daniel Moore: You may press star 2 if you would like to withdraw your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Thank you, and our first question today will be from the line of Daniel Moore with CJS Securities. Please proceed with your question.

Andy Roeder: One moment please while we poll for questions. Thank you.

Daniel Moore: Today we'll be coming from the line of Daniel Moore with CJS Securities. Please see with your questions. Thank you.

Speaker Change: Thank you, and our first question today will be coming from the line of Daniel Moore with CJS Securities. Please proceed with your questions.

Daniel Moore: Good morning, Andy. Jeff Andy. I appreciate the color. Good morning.

Daniel Moore: Thank you. Good morning, Andy, Jeff, Andy. I appreciate the color. Good morning. Maybe start with the RV side. Again, appreciate the color on the inventory discipline at the dealer levels. Not a surprise from what we've heard here. You know, I guess first...

Daniel Moore: Maybe start with the RV side. Again, I appreciate the color on the inventory discipline at the dealer levels. Not a surprise from what we've heard here.

Andy Nemeth: You know, I guess first. How low can inventories go in terms of weeks on hand from your perspective? That's one, and any update on just the cadence of how the summer has developed from a retail perspective, whether it's consistently lower year over year, getting incrementally worse, better, anything on that just anecdotally what you're hearing on a retail. So, to give us some signals would be great.

Daniel Moore: how the summer has developed from a retail perspective, whether it's consistently lower year over year, getting incrementally worse, better, anything on that, just kind of anecdotally what you're hearing on retail to give us some signals would be great.

Andy Nemeth: Sure, Dan, this is Andy. Is it relates to weeks on hand and where we're at, we're at 18 to 20 weeks here at the end of Q2. We think there's going to be continued these docking in Q3 with a little bit of uplift back towards the end of the fourth quarter as we get towards kind of the next show season. So, at this 18 to 20 weeks right now is kind of we feel like we do expect to see a dip in Q3 again, but I think it should our expectation right now based on our estimates would be putting coming back to this 18 to 20 weeks.

Andy Nemeth: Sure, Dan, this is Andy. As it relates to weeks on hand and where we're at, we're at 18 to 20 weeks here at the end of Q2. We think there's going to be continued destocking in Q3 with a little bit of uplift back towards the end of the fourth quarter as we get towards kind of the next show season. So, at this 18 to 20 weeks right now, we feel like what we do expect to see a dip in Q3 again, but I think our expectation right now, based on our estimates, would be putting it back to this 18 to 20 weeks.

Andy: Sure Dan, this is Andy. As it relates to weeks on hand and where we're at, we're at 18 to 20 weeks here at the end of Q2. We think there's going to be continued destocking in Q3 with a little bit of uplift back towards the end of the fourth quarter as we get towards kind of the next show season. So at this 18 to 20 weeks right now is kind of we feel like, well we do expect to see a dip in Q3 again, but I think it should, our expectation right now based on our estimates, would be putting coming back to this 18 to 20 weeks.

Andy Nemeth: So, again, I think it can go lower. I think there's tremendous discipline in the marketplace today. Dealers are being very thoughtful, and the OEs are being extremely thoughtful as well to make sure that they keep these inventories in check.

Andy Nemeth: So, again, I think it can go lower. I think there's tremendous discipline in the marketplace today. Dealers are being very thoughtful, and the OEs are being extremely thoughtful as well to make sure that they keep these inventories in check.

Speaker Change: Again, I think it can go lower. I think there's tremendous discipline in the marketplace today. Dealers are being very thoughtful and the OEs are being extremely thoughtful as well to make sure that they keep these inventories in check.

Andy Nemeth: I think what we get more optimistic and excited about is when we do see an inflection point. The need to restock our view would be based on our analytics and numbers that we take. 18 to 20 weeks is too low for more normal seasonalized impacts. So, from a weeks on hand perspective again, I think we're kind of bouncing along the bottom from our perspective as it relates to kind of average weeks on hand. As it relates to retail numbers, we've seen kind of consistent trends, you know, is really throughout the year so far a little bit more in May June from the cops that we saw a year ago, but overall nothing that's kind of spooked us at this point in time.

Andy Nemeth: I think what we get more optimistic and excited about is when we do see an inflection point, the need to restock, our view would be based on our analytics and numbers that 18 to 20 weeks is too low for a more normal seasonalized impact. So, from a weeks on hand perspective, again, I think we're kind of bouncing along the bottom from our perspective as it relates to kind of average weeks on hand.

Andy Nemeth: As it relates to retail numbers, we've seen kind of consistent trends, you know, really throughout the year so far. A little bit more in May and June from the comps that we saw a year ago, but overall, nothing that's kind of spooked us at this point in time. And, again, we're still estimating. We haven't changed our estimates from Q1 of being 10% down on the retail side. We just think that the weeks on hand are going to come down a little bit here again in Q3 as everybody is thoughtful and watching for the next inflection point.

Daniel Moore: And again, we're still estimating; we haven't changed our estimates from Q1 of being 10% down on the retail side. We just think that the weeks on hand is going to come down a little bit here again in Q3 as everybody's thoughtful and watching for the next inflection point. Got it. Very helpful.

Speaker Change: The week's on hand is going to come down a little bit here again in Q3 as everybody's thoughtful and watching for the next inflection point.

Daniel Moore: And then, you know, on power sports, the maintained guide, maybe just give a little bit more color both from an end market perspective in terms of, you know, what you're seeing, you know, on utility side versus a little bit more of the consumer side. And then your ability to drive content gains and now pace the market, kind of both in your term and longer term, which it organic growth look like for you in that business.

Speaker Change: Got it. Very helpful.

Speaker Change: And then, you know, on Power Sports...

Speaker Change: the maintained guide, maybe just give a little bit more color both from an end market perspective

Speaker Change: kind of both near-term and longer-term, what should organic growth look like for you in that business? I know there's a lot of a few different questions in there, but how are things trending near-term and what do you think, you know, what's the long-term algo look like?

Andy Nemeth: I know there's a lot of a few different questions in there, but how are things trending in your term and what do you think, you know, what's the long term I'll go look like. Sure, is it relates to power sports and, you know, sport tech is really super charged, you know, our presence in this space today. We're seeing attachment rates go up, and so from an organic perspective, we're optimistic about what we see there, especially as it relates to the sport tech product solution, especially on the utility side, which is really where that's focused. And so while the rec side is seeing a lot of volatility, the utility side has been much more stable. Our backlogs are stable.

Andy Nemeth: Sure. As it relates to PowerSports and, you know, Sportec has really supercharged, you know, our presence in this space today, we're seeing attachment rates go up. And so, from an organic perspective, we're optimistic about what we see there, especially as it relates to the Sportec product solution, especially on the utility side, which is really where that's focused. And so, while the REC side is seeing a lot of volatility, the utility side has been much more stable. Our backlogs are stable.

Speaker Change: You know, our presence in this space today, we're seeing attachment rates go up.

Speaker Change: And so from an organic perspective, we're optimistic about what we see there, especially as it relates to the Sportec product solution, especially on the utility side, which is really where that's focused. And so while the REC side is seeing a lot of volatility, the utility side has been much more stable. Our backlogs are stable. And again, as attachment rates are going up.

Andy Nemeth: And again, as attachments, attachment rates are going up. The sport tech team has been a fabulous addition, you know, to our portfolio of brands both culturally and from an operational perspective. And we expect continued content gains with sport tech, not only for the short term, but for the longer term as well, as they are extremely innovative. It fits right in line with our advanced product group, which is out in advance of, you know, the current model year looking out to in three model years to really partner with our customers. And so we continue to see upside potential with that business, as well as it being a strategic platform to continue to grow in that power sports market.

Andy Nemeth: And again, as attachment rates go up. The Sportec team has been a fabulous addition to our portfolio of brands, both culturally and from an operational perspective. And we expect continued content gains with Sportec, not only for the short term, but for the longer term as well, as they are extremely innovative and fit right in line with our advanced product group, which is out in advance of, you know, the current model year, looking out two and three model years to really partner with our customers.

Speaker Change: The Sportec team has been a fabulous addition to our portfolio of brands, both culturally and from an operational perspective, and we expect continued content gains.

Speaker Change: with Sportec, not only for the short term, but for the longer term as well, as they are extremely innovative.

Andy Nemeth: And so, we continue to see upside potential with that business, as well as it being a strategic platform to continue to grow in that power sports market. I feel really good about the power sports space. We feel really good about the utility side that Sportec participates in, but also, you know, their tremendous innovation and automation, as well as really working with customers to be forward-looking in that space. So, we're optimistic, short-term and long-term.

Speaker Change: And so we continue to see upside potential with that business as well as...

Andy Nemeth: So feel really good about the power sports space. We feel really good about the utility side that sport tech participates in, but as well, you know, their tremendous innovation and automation, as well as really working with customers before we're looking in that space. So we're optimistic short term hand long term.

Daniel Moore: All right. Very helpful.

Daniel Moore: One more. I'll turn back on cue. MH, you know, obviously a smaller piece of your business now overall, given you expanded in other areas, but it's been a nice, pleasant surprise year-to-date. It's up close to 20%. Are you experiencing similar growth in that part of your business? What are you hearing from customers about their production plans and outlook for the remainder of the year? I think you set up five to ten, so curious if that implies a decline, you know, softer growth in the back half or just being conservative. Any thoughts there? I think we're just being cautious as it relates to MH towards the back half of the year.

Speaker Change: All right, very helpful. One more and I'll jump back in queue. MH, you know, obviously a smaller piece of your business now overall, given you expanded in other areas, but it's been a nice pleasant surprise year-to-date. Shipments up close to 20%.

Speaker Change: Are you experiencing similar growth in that part of your business, and what are you hearing from customers about their production plans and outlook for the remainder of the year? I think you said up to 5 to 10, so I'm curious if that implies a decline, you know, softer growth in the back half, or just being conservative? Any thoughts there?

Andy Nemeth: I think we're just being cautious as it relates to MH towards the back half of the year. We've been pleasantly surprised with MH production levels. We think inventories are in balance in the channel. We absolutely believe in the housing market and the long-term value there as it relates to inventory in the space, especially on the single-family side. And so, you know, MH has been very positive for us. Our team's done a great job gaining content.

Speaker Change: I think we're just being cautious as it relates to MH towards the back half of the year. We've been pleasantly surprised with MH production levels. We think inventories are in balance in the channel. We absolutely believe in the housing market and the long-term value there as it relates to certainly inventories in the space, especially on the single-family side. And so, you know, MH has been very positive for us. Our team's done a great job with gaining content. We've got new products out there. So I feel good about MH. And again, I think...

Andy Nemeth: We've been pleasantly surprised with MH production levels. We think inventories are in balance in the channel. We absolutely believe in the housing market and the long-term value there is that relates to certainly inventories in the space, especially on the single-family side. And so, you know, MH has been very positive for us. Our team's done a great job of gaining content.

Andy Nemeth: We've got new products out there, so I feel good about MH, and I think five to ten percent, just being cautious, looking out. I also think that if we do see some interest rate inflection points similar to the outdoor enthusiast market, that will get some uptick, you know, as well on the MH side. So, you know, nothing negative is what I would say and expect it. You know, continue positive results from our housing group.

Andy Nemeth: We've got new products out there, so I feel good about MH. And again, I think 5 to 10 percent, just being cautious and looking out. I also think that if we do see some interest rate inflection points, similar to the outdoor enthusiast market, we'll get some uptick, you know, as well on the MH side. So, you know, nothing negative is what I would say and I expect to see positive results from our housing group. All right.

Speaker Change: 5-10%. Just being cautious looking out. I also think that if we do see some interest rate inflection point similar to the outdoor enthusiast market, that we'll get some uptick as well on the MH side. So nothing negative is what I would say and expect to continue positive results from our housing group.

Daniel Moore: All right, really helpful. I'll jump back with follow-ups. Thank you.

Daniel Moore: All right, really helpful. Jump back with follow-ups. Thank you.

Speaker Change: All right, really helpful. I'll jump back with follow-ups. Thank you.

Mike Schwartz: Our next question is from the line of Mike Schwartz with Through Ascurities. Please receive your questions.

Speaker Change: Thank you.

Speaker Change: Our next question is from the line of Mike Swartz with Truist Securities. Pleased to see you with your questions.

Mike Schwartz: Hey guys, good morning. Maybe just a follow-up on the power sports side of the business and understanding you're more tied to the utility side of that, but maybe give us a sense. I think Andy, you would said that, you know, it's going, the acquisition is going better than paid, and maybe give us a little framework for what exactly you mean. Is that pop line, is that industry demand, is that margins and integration, just any any color around that would be great. Certainly, as we look at certainly Schwartz tech, it's been positive, like I said, from all fronts, you know, as it relates to the team, their cultural fit, alignment.

Mike Swartz: Hey guys, good morning. Maybe just a follow-up on the power sports side of the business and understanding you're more tied to the utility side of that, but maybe give us a sense. I think Andy, you had said that the acquisition is going better than anticipated. Maybe give us a little framework for what exactly you mean.

Speaker Change: Top line, is that industry demand, is that margins and integration, just any color around that would be great.

Andy: Certainly, as we look at certainly sport tech, it's been positive like I said from from all fronts.

Speaker Change: You know, as it relates to the team, their cultural fit, alignment.

Andy Nemeth: We've done a lot of work as it relates to synergy opportunities and introducing, you know, our brand portfolio to the Schwartz tech team and vice versa. We've had customers inquire, you know, in our outdoor enthusiast spaces, about the capabilities of Schwartz Tech. So I would just say positive energy overall, as it relates to the space in general. Again, you know, the resilience in the utility sector, which is primarily where Schwartz tech plays today, as it relates to the cabin closures, and it's a full solutions model similar to what we're working on in our other businesses.

Speaker Change: We've done a lot of work as it relates to synergy opportunities and introducing

Speaker Change: you know, our brand portfolio to the Sportec team and vice versa. We've had customers inquire, you know, in our outdoor enthusiast spaces about the capabilities of Sportec.

Speaker Change: I would just say positive energy overall as it relates to the space in general. Again, you know, the resilience in the utility sector, which is primarily where Sportec plays today as it relates to the cabin closures. And it's a full solutions model, similar to what we're working on in our other businesses.

Andy Raider: You know, we've seen traction. Again, increasing attachment rates for us, from our perspective, you know, plays out really well. And so we're very, very excited about that. In addition to, again, like I said, the strategic opportunities that exist to really launch off of this platform in that power sports space, you know, leveraging the Schwartz tech's team's abilities and talent to really kind of continue to expand our presence. So overall, it's just been very, very positive. And, you know, from all fronts, including the operational performance and financial performance and the business from our expectations. And I think you would previously mentioned, I may have missed this, but you had mentioned on the first quarter call that you anticipated about 400 million in annualized revenue in the power sports, power sports segment.

Speaker Change: You know, we've seen traction, again, increasing attachment rates for us.

Speaker Change: from our perspective you know plays out really well and so we're very very excited about that.

Speaker Change: In addition to, again, like I said, the strategic opportunities that exist to really launch off of this platform in that power sports space, you know, leveraging the SporTech team's abilities and talent to really kind of continue to expand our presence. So, overall, it's just been, it's just been very, very positive.

Speaker Change: and from all fronts, including the operational performance and financial performance of the business from our expectations.

Speaker Change: And I think you had previously mentioned, I may have missed this, but you had mentioned on the first quarter call that you anticipated about 400 million in annualized revenue in power sports, your power sports segment. Is that still the right way to think about it?

Andy Raider: Is that still the right way to think about it?

Andy Raider: Yeah, Mike, this is Andy Raider. Yeah, we're tracking to that number. So, yeah, things are going well with that business. And that's still what we're tracking towards. That's awesome.

Andy Roeder: Yeah, Mike, this is Andy Roeder. Yeah, we're tracking to that number. So yeah, things are going well with that business. And that's, that's still what we're tracking towards.

Speaker Change: Yeah, Mike, this is Andy Roeder. Yeah, we're tracking to that number, so yeah, things are going well with that business, and that's still what we're tracking towards.

Mike Schwartz: Some of them are inside. It's an understanding you have a little more exposure to some areas that are a bit softer relative than maybe the broader industry. But the question I have is just pertains more to the content per unit side. Is there any way to think about, you know, how much greater content per unit is in some of those segments that you view towards? It's relative to the broader, you know, the broader content pool, meaning, you know, your content into the ski weight manufacturers 20% more than the average boat manufacturer. I'm just trying to get a sense of anyway, you know, to think about that.

Speaker Change: Awesome. Let's talk a little bit about the emerging side, and understanding you have a little more exposure to some areas that are a bit softer relative than maybe the broader industry. But the question I have is just...

Speaker Change: pertains more to the content per unit side. Is there any way to think about, you know,

Andy Roeder: How much greater content per unit is in some of those segments that you view towards?

Speaker Change: how much greater content per unit is in some of those segments that you view towards.

Speaker Change: relative to the broader, you know, the broader content pool.

Speaker Change: Meaning, you know, your content into the ski weight manufacturer is 20% more than, you know, the average boat manufacturer. I'm just trying to get a sense of any way, you know, to think about that.

Andy Nemeth: Yeah, this is Andy Mike. And without question, we believe there's continued runway in those areas where we're higher index towards as well, which we talk about, especially as it relates to skiing, waking, pontoon. And, you know, one of the things again that we're excited about is our advanced product group, which is bringing solutions, you know, to these markets and to these customers. And the breadth and depth of our portfolio, you know, really is showing itself today in the opportunities that exist from a solutions perspective across the spectrum. And so, you know, let's do kind of where we can go.

Speaker Change: Yeah, this is Andy, Mike, and with.

Speaker Change: Without question, we believe there's continued runway in those areas where we're higher indexed towards as well, which we talk about especially as it relates to Ski & Wake and Pontoon. And you know, one of the things again that we're excited about is our Advanced Product Group, which is bringing solutions.

Speaker Change: to these markets and to these customers and the breadth and depth of our portfolio.

Speaker Change: really is showing itself today in the opportunities that exist from a solutions perspective across

Mike Schwartz: We absolutely believe we can continue to grow content in those spaces that we're heavily indexed and certainly in the spaces that we're not assembly index. So it's the runway is there, you know, we really kind of target from an organic perspective, two to three percent annually. And we fully expect to achieve that, if not exceed that on an annual basis, going forward in all of our markets, including marine. And also, including those markets where we're heavily indexed. Okay.

Speaker Change: the spectrum, and so...

Speaker Change: you know, as it relates to kind of where we can go, we absolutely believe we can continue to grow content in those spaces that we're heavily indexed and certainly in the spaces that we're not as heavily indexed. So...

Speaker Change: It's, it's, it's the runway is there, you know, we really kind of target from an organic perspective, two to three percent annually, and we fully expect to achieve that, if not exceed that on an annual basis going forward in all of our markets, including marine and also including those markets where we're heavily indexed.

Andy Raider: And it's one final one for me, just housekeeping in terms of the 10% growth that was reported in the quarter. Can you give us the breakout between industry, MNA, organic, please. Yeah, sure, Mike, this is the indicator again. Overall industry, we have down 2% acquisition growth, up 7%, and then organic growth up 5%. Of that organic growth, breaks down with pricing down 2% and share content up 7%. Okay.

Speaker Change: Okay, and it's one final one for me, just housekeeping in terms of the 10% growth that was reported in the quarter. Can you give us the breakout between industry, M&A, organic please?

Speaker Change: Yeah sure Mike, this is Andy Roeder again. Overall industry we have down 2%, acquisition growth up 7%, and then organic growth up 5%.

Andy Roeder: Of that organic growth breaks down, with pricing down 2% and share content up 7%.

Speaker Change: of that organic growth breaks down with pricing down 2% and share content up 7%.

Mike Schwartz: Wonderful.

Mike Schwartz: Thank you.

Mike Swartz: Okay, wonderful. Thank you.

Craig Kennison: The next question is from the line of Craig Kensington, the Third. Please just use your question. Yeah. Thanks. Good morning. Thanks for taking my question as well. And, you know, we've been concerned about this power sports destock for a while. And I think you correctly called that you're in a better position given where you're exposed. But just curious what signals you look for for, you know, a slowdown in that utility category and whether you're seeing any sign at all. That consumer might be more reluctant to spend. Craig, we're not seeing that at this point in time.

Craig Kennison: The next questions are from the line of Craig Kennison with Barrett. Please answer your questions.

Speaker Change: The next questions are from the line of Craig Kenson with Barrett. Please proceed with your questions.

Craig Kennison: Yeah, thanks. Good morning. Thanks for taking my question as well. And, you know, we've been concerned about this Powersports destock for a while, and I think... you know, might be more reluctant to spend.

Andy Nemeth: Greg, we're not seeing that at this point in time. We're seeing again, solid backlogs take place. We're seeing our attachment rates grow. So we feel like the opportunity there, you know, continues to be stable to higher as it relates to our expectations. And so the signals we look for certainly are going to be those two. You know, what do our backlogs look like? We're constantly talking to our customers to understand where they're at, but we feel like inventories are in balance.

Andy Nemeth: We're seeing, again, solid backlogs take place. We're seeing our attachment rates grow. So we feel like the opportunity there, you know, continues to be stable to up as it relates to our expectations. So the signals we look for certainly are going to be those two, you know, what's what are our backlogs of life. We're constantly talking to our customers to understand where they're at. But we feel like inventories are in balance. Again, we feel like our penetration has been strong, and the opportunities on a go-forward basis with new products and innovations is certainly out there and exciting for us.

Speaker Change: And we feel like our penetration has been strong. And the opportunities on a go-forward basis with new products and innovations is certainly out there and exciting for us. So we're not seeing any signs of weakening there as it relates to that business. Even if we do see a little bit of pullback on utility, which we're not seeing at this point in time, you know, again, attachment rates continue to go up. And we serve both.

Andy Nemeth: So we're not seeing any signs of weakening there as it relates to that business, even if we do see a little bit of pullback on utility, which we're not seeing at this point in time. You know, again, the attachment rates continue to go up. And we serve both the OE side and the aftermarket side; the aftermarket side runs through the OE's. That being said, there's tremendous potential for outfit on existing units that are out there in the space today. So, you know, we kind of look at SportTech in its universe of primary, you know, primarily utility sector and its ability to continue to increase its attachment rates in that space.

Speaker Change: The OE side and the aftermarket side. The aftermarket side runs through the OEs.

Speaker Change: That being said, there's tremendous potential for upfit on existing units that are out there in the space today. So, you know, we kind of look at SporTech.

Speaker Change: in its

Speaker Change: Thank you.

Andy Nemeth: That's helpful, Andy. And maybe just a follow-up as it relates to SportTech, you seem very excited about, you know, that as a platform, a new platform in power sports. You've also acquired Rockford Fosgate. I'm curious if you can help us understand how synergies develop from your acquisition. It's hard for us on the outside to see some of those internal developments related to synergies and what the platform can do as well. Maybe you can shed some light on that. Sure. From the operational side of the business, a lot of the manufacturing processes that SportTech does today are existing processes and capabilities that we have across our spectrum as it relates to equipment, you know, or understanding of best practices.

Craig Kennison: That's helpful, Andy. And maybe just to follow up, as it relates to Sportec, you seem very excited about that as a platform, a new platform in power sports. You've also acquired Rockford Fosgate. I'm curious if you can help us understand how synergies develop from your acquisition. It's hard for us on the outside to see some of those internal developments.

Andy: That's helpful, Andy. And maybe just to follow up, as it relates to Sport Tech, you seem very excited about

Speaker Change: You know, that as a platform, a new platform in power sports. You've also acquired Rockford Fosgate. I'm curious if you can help us understand how synergies develop from your acquisition. It's hard for us on the outside to see.

Speaker Change: some of those internal developments related to synergies and what the platform can do as one. Maybe you can shed some light on that.

Speaker Change: Sure

Speaker Change: From the operational side of the business, a lot of the manufacturing processes.

Speaker Change: that Sportec does today are existing processes and capabilities that we have across our spectrum as it relates to equipment, our understanding of best practices, and so there's a lot of linkage amongst

Andy Nemeth: And so there's a lot of linkage amongst the products that SportTech produces for us. And then when we think about bringing, you know, full solutions to the customer, SportTech already has a solution as it relates to the cabin closure, whether it's the doors, the windows, the tubing, the framing. But we've got electronics capabilities. We've got audio. We've got dash panel and wire harnesses. We've got technology that we incorporate even further into a full solution that SportTech brings today to bring kind of, you know, look forward their ability to be out in front, you know, as it relates to innovation and the alignment with where we want to go, just a tremendous amount of synergies and partnership.

Speaker Change: the products that Sportec produces for us. And then when we think about bringing full solutions to the customer, Sportec already has a solution as it relates to the cabin closure, whether it's the doors, the windows.

Speaker Change: the tubing, the framing, but we've got...

Speaker Change: Electronics capabilities, we've got audio, we've got dash panel and wire harnesses, we've got technology that we can incorporate even further into a full solution that Sportec brings today to bring kind of a one-stop shop for our customers in that space.

Speaker Change: and really again be able to be extremely innovative. So it's not just the manufacturing. Again, we do a lot of similar processes that Sportec already does but their engineering, their look forward, their ability to be out in front, you know, as it relates to innovation and in alignment with where we want to go. Just a tremendous amount of synergies and partnership and again I don't want to understate the impact of the cultural fit with the team. It's just a fabulous group of...

Jeff: And again, I don't want to state the impact of the cultural fit with the team. It is just a fabulous group of leaders who are extremely motivated and energized and connected. And, you know, again, they fit perfectly with our portfolio of companies. And Craig, one other thing I would add to that is, this is Jeff. Last week, we were very excited to bring operational managers from all of our companies from all over the country into Elkhart last week to really start collaborating and making sure all of our divisions kind of know what the capacities and capabilities are from all of our operations.

Speaker Change: of leaders who are extremely motivated and energized and connected, and again, they fit perfectly with our portfolio of companies.

Speaker Change: And Craig, one other thing I would add to that is, this is Jeff, last week we were very excited to bring operational managers from all of our companies from all over the country into Elkhart last week.

Craig Kenson: to really start collaborating and making sure all of our divisions kind of know what the capacities and capabilities are from all of our operations.

Jeff: So we can really start to grow those relationships kind of across all of our companies. So if there's something, you know, some of the other operations guys can help out with, it's really advantageous to really get that collaboration together, and that's where some of those synergies can really start to take place kind of behind the scenes. There's a set of assumptions around demand and stocking levels in your end markets. Sure, Craig, this is Andy. I think initially, and again, we're early in this phase. We've certainly done modeling under various scenarios, but we expect, you know, kind of 2025, again at this point in time, to be up. And as we look at where inventory levels are at, you know, we think there needs to be a restock.

Speaker Change: So we can really start to grow those relationships kind of across all of our companies So if there's something, you know, some of the other operations guys can help out with it's it's really advantageous to really get that collaboration together And and that's where some of those synergies can really start to take place kind of behind the scenes

Craig Kennison: That's great. Thank you. And quickly on 2025, I know it's early, but I'm just wondering as you plan for next year, what is your set of assumptions around?

Speaker Change: That's great, thank you. And quickly on 2025, I know it's early, I'm just wondering as you plan for next year, what is your set of assumptions around

Speaker Change: demand and stocking levels in your end markets.

Speaker Change: Sure, Craig. This is Andy. I think initially, and again, we're early in this phase, we've certainly done modeling under various scenarios, but we expect, you know, kind of 2025, again, at this point in time, to be up.

Speaker Change: And as we look at where inventory levels are at, you know,

Andy Nemeth: And if rates come down, it's going to certainly be more opportunistic for everybody in the space at the retail level, at the dealer level, for everyone to be able to participate in that restock. So, you know, it's early; we think it's going to be up in each of our markets next year. You can say mid single digit percentages if you want to low double, you know, as a guess at this point in the estimate, but certainly the restock factor points to, you know, bigger numbers than that. So that's where we can get really optimistic at the inflection point.

Speaker Change: We think there needs to be a restock and if rates come down, it's going to certainly be more opportunistic.

Speaker Change: for everybody in the space, at the retail level, at the dealer level, for everyone to be able to participate in that restock.

Speaker Change: You know, it's early, we think it's going to be up.

Speaker Change: each of our markets next year. You can say mid single digit percentages if you want to low double you know as a guess at this point in an estimate but certainly the restock factor points to you know bigger numbers than that. So that's where we can get really optimistic at the inflection point. I don't know that we're ready to to pinpoint that specifically yet but that's where we get excited again is the restock place especially given the weeks on hand that we see today in in our markets.

Craig Kennison: I don't know that we're ready to pinpoint that specifically yet. But that's where we get excited again: is the restock place, especially given the weeks on hand that we see today in our markets. Great. Thank you.

Scott Stember: Our next questions are from the line of Scott Stembert, with what them came. Please excuse your questions. Good morning, guys. Thanks for taking my questions. Morning.

Scott Stember: Our next questions are from the line of Scott Stember with Rotham Cam. Please proceed with your questions.

Speaker Change: Great. Thank you.

Speaker Change: Our next questions are from the line of Scott Stembert with RothMKM. Please proceed with your questions.

Scott Stembert: Good morning, guys, and thanks for taking my questions.

Scott Stember: You guys were talking about the OEMs, I guess particularly on the rec side, RV and marine, obviously being a lot more cautious in the back half of the year. And I guess part of that is, sounds like the model year 25 rollout has kind of been pushed out a little bit. But all in, what are you expecting from an order perspective from the OEMs, notably in RVs, in the third quarter? What are you seeing in July? Yeah. So, so far, we've seen, you know, pretty consistent production levels as we've gone through that. I don't know that we've seen the model years being pushed back, as you, as you mentioned a couple minutes ago, but we, you know, we've seen them, you know, pretty consistent so far.

Scott Stembert: You guys were talking about the OEMs, I guess particularly

Speaker Change: on the wreck side, RV and Marine.

Speaker Change: obviously being a lot more cautious in the back half of the year and I guess part of that is sounds like the model year 25 rollout has kind of been pushed out a little bit but all in what are you expecting from an order perspective from the OEMs notably in RVs?

Speaker Change: in the third quarter. What are you seeing in July?

Speaker Change: Yeah, so, so far we've seen, you know, pretty consistent production levels.

Speaker Change: As we've gone through that, I don't know that we've seen the model years being pushed back as you as you mentioned a couple minutes ago, but.

Speaker Change: We, you know, we've seen them, you know, pretty consistent so far.

Jeff: Certainly, you know, this part of the year, we will see, you know, intermittent shutdowns, a, you know, a couple days off here, maybe a week off there as it, you know, gets around the, you know, Labor Day timeframe in the open house. But nothing really unexpected, nothing, you know, kind of jumping off the page from, you know, looking at all the production levels that are out there right now. So we think pretty consistent, but, you know, as we still believe, as Andy's mentioned a couple of times that the dealers are going to bring that inventory weeks on hand down.

Speaker Change: Certainly, you know, this part of the year we will see, you know, intermittent shutdowns a, you know, a couple days off here, maybe a week off there, as it, you know, gets around the, you know, Labor Day timeframe and in the open house, but.

Speaker Change: Nothing really unexpected, nothing, you know, kind of jumping off the page from, you know, looking at all the production levels that are out there right now. So we think pretty consistent, but, you know, as.

Speaker Change: As we still believe, as Andy's mentioned a couple times, that the dealers are going to bring that inventory weeks on hand down. We expect that there will be you know some slower weeks here and there but you know as far as the overall production rates on a per day basis they seem pretty consistent.

Jeff: We expect that there will be, you know, some slower weeks here and there, but, you know, as far as the overall production rates on a per day basis, they seem pretty consistent.

Scott Stember: So, you know, as far as the overall production rates on a per day basis, you know, as far as the overall production rates on a per day basis, you know, as far as the overall production rates on a per day basis, you know, as far as the overall production rates on a per day basis, you know, as far as the overall production rates on a per day basis, you know, as far as the overall production rates on a per day basis, you know, as far as the overall production rates on a per day basis, you know, as far as the overall production rates on a per day basis, you know, as far as the overall production rates on a per day basis, you know, as far as the overall production rates on a per day basis, you know, as far as the overall production rates on a per day basis, you know, as far as the overall production rates on a per day basis, you know, as far as the overall production rates on a per day basis, you know, as far as the overall production rates on Scott, and the 7% organic content that you talked about, very impressive, but going into next year, again, we know it's early, but just trying to get a sense, I guess over the next 12 months, where would you expect that content number to be as far as on a growth perspective?

Speaker Change: Got it. And you know the 7% organic content that you talked about, very impressive. But going into next year, again we know it's early, but just trying to get a sense I guess over the next 12 months, where would you expect that content number to be as far as a growth perspective?

Andy Nemeth: Yes, Scott, this is Andy. I think, again, in general, we're targeting 2 to 3%, but I think what we're really excited about right now is we've picked up a lot of business that should be forthcoming over the next 12 to 18 months, and our teams have been extremely active in working with our customers. The amount of prototyping that we're doing today is more than we've seen in the last five years in both of our markets, and so we see a lot of innovation happening. We've picked up organic content, and so we certainly set our bar at 2 to 3% organic, but I would expect to exceed that over the next 12 to 18 months, just given the penetration that we've had, the innovation, and the solutions marketing that we're doing with our customers over the longer term.

Scott Stember: Yeah, Scott, this is Andy. I think, again, in general, we're targeting two to three percent, but I think what we're really excited about, you know, right now is

Speaker Change: We've picked up a lot of business that should be forthcoming over the next 12 to 18 months and our teams have been extremely active in working with our customers the number of

Speaker Change: The amount of prototyping that we're doing today is more than we've seen in the last five years in both of our markets. And so we see a lot of innovation happening. We've picked up organic content. And so, you know, we certainly set our bar at kind of 2 to 3 percent organic, but I would expect to exceed that over the next 12 to 18 months, just given the penetration that we've had, the innovation, and the solutions marketing that we're doing with our customers over the longer term.

Scott Stember: Got it.

Scott Stember: Thanks, guys, that's all I have. Thanks, Scott.

Scott Stember: Got it. Thanks guys, that's all I have.

Noah Zatzkin: The next questions are from the line of Noah's asking with KeyBank Capital Markets. Please just use your questions. Thanks for taking my question. I'm just kind of piggybacking off of a question, I think a couple of questions ago, surrounding some of the volume expectations cross end markets for next year. If you guys were to grow like mid single digits to low double digits next year, how do you think about the margin opportunity relative to this year? You know, I assume and you may have mentioned this, but the vast majority of kind of like the margin guide tweaked down this year was the maybe $100 million of kind of incremental and market softness this year.

Speaker Change: Thanks, Scott.

Speaker Change: Our next questions are from the line of Noah Zaskin with KeyBank Capital Markets. Please receive your questions.

Scott Stember: Hi, thanks for taking my question. I'm just kind of piggybacking off of a question, I think a couple questions ago, just around the volume expectations and cross-end markets for next year. If you guys were to grow like mid-

Noah Zaskin: Hi, thanks for taking my question. Just kind of piggybacking off of a question, I think a couple questions ago, just around the volume, expectations, cross-end markets for next year, if you guys were to grow like mid-

Speaker Change: mid-single digits to low-double digits next year. How do you think about the margin opportunity relative to this year? You know, I assume, and you may have mentioned this, but the vast majority of kind of like the...

Scott Stember: Margin Guide Tweakdown this year was the maybe $100 million of kind of incremental end market softness this year. So just trying to think through the leverageability of margins next year as volumes increase. Thanks.

Noah Zatzkin: So just trying to think through the leverage ability of margins next year as volume increase. Thanks.

Andy Nemeth: So this is Andy without giving up an exact numbers that relates to kind of the incremental margin factor. What I would tell you is, we've sized our businesses in each of our markets to the current run rates. And we talk about earnings power of the organization, and the company today are ability to flex back up. We've got the capacity. We do not need to add a significant amount of incremental fixed costs to support, you know, the volume levels that you're talking about. And so we think about the upside margin potential very strong. And that's what gets us really excited today in each of the markets.

Scott Stember: Sure, this is Andy. Without giving an exact number as it relates to kind of the incremental...

Speaker Change: margin factor. What I would tell you is is we've sized our businesses in each of our markets.

Speaker Change: to the current run rates. And we talk about earnings power of the organization and the company today, our ability to flex back up. We've got the capacity. We do not need to add a significant amount of incremental fixed costs to support.

Speaker Change: you know, the volume levels that you're talking about. And so we think about the upside margin potential.

Speaker Change: very strong, and that's what gets us really excited today in each of the markets. And when you look at kind of, we pulled our operating margins back a little bit, you know, again, we brought our marine numbers down from a wholesale perspective.

Andy Nemeth: And when you look at, kind of, we pulled up, we pulled our operating margins back a little bit. You know, again, we brought a marine numbers down from a wholesale perspective, you know, to match up with run rates being consistent, you know, through the rest of the year. And that's a high margin, high engineered product group, right, with a high fixed cost base. So the leverage ability from our perspective is meaningful. And as we look at, you know, potential mid single to double digit up ticks, you know, in volume for us across the board. That's where we get excited about the earnings power.

Speaker Change: you know, to match up with run rates being consistent, you know, through the rest of the year. And that's a high-margin, high-engineered product.

Speaker Change: group, right, with a high fixed cost base. So the leverageability from our perspective is meaningful, and as we look at, you know, potential mid-single to double-digit upticks.

Speaker Change: Thank you.

Andy Nemeth: So without, you know, kind of giving you the exact numbers on incremental. We are very optimistic about our ability to flex up without adding significant incremental fixed cost.

Andy Raider: really helped them, maybe just one more. Any update on kind of what you're seeing out there from an M&A perspective in terms of opportunity set valuations that are sending you into call out there. Sure, M&A is, we're continuously cultivating our acquisition pipeline, you know, organically and, you know, I'll tell you, outside deal flow coming from third parties has kind of slowed down a little bit, or is fairly inactive right now. We are seeing some deals come across from the investment banking side, but we are always actively, organically cultivating our own acquisition pipeline. And so, deal multiples have stabilized, you know, certainly from where they were a couple of years ago. As we look at the deal perspectives, you know, everybody kind of is putting valuations around normalized run rates versus kind of the run rates that we're running at today.

Scott Stember: Really helpful. Maybe just one more. Any update on kind of what you're seeing out there from an M&A perspective in terms of opportunity set valuations that are sending you to call out there?

Andy Nemeth: Sure, M&A. We're continuously cultivating our acquisition pipeline, you know, organically. And, you know, I'll tell you, outside deal flow coming from third parties has kind of slowed down a little bit or is fairly inactive right now. We are seeing some deals come across from the investment banking side, but we are always actively organically cultivating our own acquisition pipeline. And so deal multiples have stabilized, you know, certainly from where they were a couple of years ago.

Andy Nemeth: Sure, M&A is we're continuously cultivating our acquisition pipeline you know organically and you know I'll tell you outside deal flow coming for third parties has kind of slowed down a little bit or is

Andy Nemeth: is fairly inactive right now. We are seeing some deals come across from the investment banking side, but we are always actively organically cultivating our own acquisition pipeline. And so.

Andy Nemeth: Deal multiples have stabilized, you know, certainly from where they were a couple of years ago. As we look at the deal perspectives, you know, everybody kind of is...

Andy Nemeth: As we look at the deal perspectives, you know, everybody kind of puts valuations around normalized run rates versus kind of the run rates that we're running at today. And so, you know, we can be very flexible. We can be very creative when it comes to creating valuation opportunities related to deals, and we're continuously cultivating our acquisition pipeline. We're optimistic about it. We are actively looking at acquisitions, you know, and we'll continue to do so. Our financing platform is very strong, as we've noted. Leverage is where we want it to be, and our liquidity is extremely strong. So we are actively looking at acquisitions and continuously cultivating acquisitions in our pipeline.

Andy Nemeth: is called the Venture Acquisition Pipeline.

Andy Raider: And so, you know, we can be very flexible; we can be very creative when it comes to creating valuation opportunities related to deals. And we are continuously cultivating our acquisition pipeline; we're optimistic about it. We are actively looking at acquisitions, you know, and we'll continue to do so. Our financing platform is very strong, as we've noted; leverage is where we want it to be, and our liquidity is extremely strong. So, we are actively looking at acquisitions and continuously cultivating acquisitions at our pipeline.

Andy Nemeth: We are actively looking at acquisitions, you know, and we'll continue to do so. Our financing platform is very strong, as we've noted. Leverages is where we want it to be, and our liquidity is extremely strong, so...

Andy Nemeth: We are actively looking at acquisitions and continuously cultivating acquisitions in our pipeline.

Noah Zatzkin: Thank you.

Tristan Thomas: Our next question is from the line of Tristan Thomas Martin with BMO Capital Markets. Please excuse your questions.

Tristan Thomas Martin: Our next question is from the line of Tristan Thomas Martin with BMO Capital Markets. Please answer your question.

Speaker Change: Thank you.

Speaker Change: Our next question is from the line of Tristan Thomas Martin with BMO Capital Markets. Please receive your questions.

Tristan Thomas: Good morning. Morning. I haven't mentioned a couple of times; there needs to be a restock, probably 25. I was just wondering, what do you think gets dealers the confidence to restock in terms of timing? Is it has a selling season, is it after retail and flux? Are you kind of thinking about that? Yeah, I think, you know, we're thinking that, you know, getting into the next selling season. So at the end of the, at the end of 2024 here, you know, maybe late November into December, I think they, you know, if they get to the levels that we believe that they're going to go to through the third quarter here and starting in the fourth, that they'll need to have to restock coming into the show season, the selling season.

Speaker Change: Good morning.

Speaker Change: Morning. I've mentioned a couple times there needs to be a restock probably in 2025. I was just wondering what what do you think gets dealers the confidence to restock in terms of timing? Is it ahead of the selling season? Is it after retail influx? How are you kind of thinking about that?

Andy Nemeth: Yeah, I think, you know, we're thinking that, you know, getting into next selling season, so at the end of this, at the end of 2024 here, you know, maybe late November into December, I think they, you know, if they get to the levels that we believe that they're going to go to through the third quarter here and starting in the fourth, they'll need to have to restock coming into the show season, the You know, just through our kind of conversations and also our business and the transportation side, we saw that there was a pretty quick push going into the show season to get product out there, and in some cases, maybe a little bit late, so we think that's when the restock will happen.

Andy Nemeth: Yeah, I think, you know, we're thinking that, you know, getting into next selling season. So, at the end of this, at the end of 2024 here, you know, maybe.

Andy Nemeth: Late November into December

Andy Nemeth: I think they, you know, if they get to the levels that we believe that they're going to go to through the third quarter here and starting in the fourth.

Andy Nemeth: that they'll need to have to restock coming into the show season, the selling season.

Andy Nemeth: You know, just through our kind of conversations and also our business and the transportation side. You know, we saw that there was a pretty quick push going into, you know, the show season to get product out there. And in some cases, maybe a little bit late. So we think that that's when the restock will happen. Maybe, maybe it's a slight bit earlier this year, you know, end of 24 into 25. And really, at the inventory levels that we see, that they're going to go to, that, you know, in a restock is inevitable.

Andy Nemeth: just through our kind of conversations and also our business and the transportation side.

Andy Nemeth: You know, we saw that there was a pretty quick push going into

Andy Nemeth: You know, the show season to get product out there and in some cases, maybe a little bit late. So.

Andy Nemeth: Maybe it's a slight bit earlier this year, you know, end of 2024, end of 2025, and really, at the inventory levels that we see that they're going to go to, a restock is inevitable.

Andy Nemeth: We think that that's when the restock will happen. Maybe it's a slight bit earlier this year.

Andy Nemeth: you know, end of 24, end of 25, and really at the inventory levels that we see that they're going to go to that, you know, a restock is inevitable.

Andy Nemeth: Okay, and then just a question of camping roles in their aggressive targeting cheaper price points. It seems like a lot of dealership chains are kind of following that. If that continues and there's kind of this renewed push towards cheaper units in 25 as well. Is there any way to kind of quantify what I could do to your content?

Speaker Change: Okay, and then just a question of camping roles in the very aggressive targeting cheaper price points. It seems like a lot of dealership chains are kind of following that. If that continues and there's kind of this renewed push towards cheaper units in 25 as well, is there any way to kind of quantify what that could do to your content?

Andy Nemeth: If that continues and there's kind of this renewed push towards cheaper units in 25 as well, is there any way to kind of quantify what that could do to your content?

Andy Nemeth: This is on the RV said. Yeah, this is Andy. At this point, you know, again, we are very active in working with our customers and partnering with our customers on pricing. Is it related to our products? And we were very fluid, both on the up and on the down, and prices are fairly stable across our commodities right now and have been. And so we're not expecting a lot of content erosion. The mix is definitely skewed towards the low end on the RV side of the business as it relates to smaller units. That do have less content in them.

Andy Nemeth: This is on the RV side.

Andy Nemeth: Yeah, this is Andy. At this point, you know, again, we are very active in working with our customers and partnering with our customers on pricing as it relates to our products. And we are very fluid, both on the up and on the down, and prices are fairly stable across our commodities right now and have been.

Speaker Change: And so we're not expecting a lot of content erosion. The mix is definitely skewed towards the low end on the RV side of the business as it relates to.

Andy Nemeth: smaller units.

Andy Nemeth: And so we see upside potential not only when dealers restock, but also we see upside potential as it relates to affordability and the consumer moving towards larger units from the smaller unit base that they're off of today. So I think we're not expecting a lot of content erosion related to the pricing that's out there. We're going to remain very, very active in partnering with our customers as we see commodity movements in our prices. But that is a change from anything that we've been doing, you know, as it relates to our partnership with our customers, and we'll expect to continue to do that.

Andy Nemeth: that do have less content in them.

Andy Nemeth: And so we see upside potential, not only when dealers restock, but also we see upside potential as it relates to affordability and the consumer moving towards larger units from the smaller unit base that they're off of today.

Speaker Change: I think we're not expecting a lot of content erosion related to the pricing that's out there. We're going to remain very, very active in partnering with our customers as we see commodity movements in our prices, but that isn't changed from anything that we've been doing.

Speaker Change: you know, as it relates to our partnership with our customers, and we'll expect to continue to do that.

Daniel Moore: Thank you.

Daniel Moore: Our next questions are from the line of Daniel Moore with C.J.S. Securities. Please thank you.

Speaker Change: Okay, thank you.

Daniel Moore: Our next questions are from the line of Daniel Moore with CJS Securities. Please proceed with your question.

Daniel Moore: Thanks.

Daniel Moore: Mr. Moore, you may proceed with your questions.

Andy Nemeth: I'd like to now turn the call back to Andy Nemeth for closing remarks.

Daniel Moore: Thank you.

Daniel Moore: I'd like to now turn the call back to Andy Nemeth for closing remarks.

Andy Nemeth: Thank you. I want to end the call today by once again thanking our dedicated employees for their contributions to Patrick and their commitment to our Better Together culture, which helps drive our success each and every day. Their expertise and leadership allows us to deliver on our good, better, best value proposition, support our customers, and develop innovative customer focus solutions.

Speaker Change: Thank you. I want to end the call today by once again thanking our dedicated employees for their contributions to Patrick and their commitment to our Better Together culture, which helps drive our success each and every day.

Speaker Change: Their expertise and leadership allows us to deliver on our good, better, best value proposition, support our customers, and develop innovative, customer-focused solutions.

Andy Nemeth: We remain energized about the future of Patrick and will continue to grow through organic growth, innovation, and the pursuit of creative acquisitions that complement our existing portfolio. We're focused on driving resilient results, maintaining our strong balance sheet, generating free cash flow, and maximizing returns to our shareholders.

Speaker Change: We remain energized about the future of Patrick and will continue to grow through organic growth, innovation, and the pursuit of accretive acquisitions that complement our existing portfolio.

Andy Nemeth: We're focused on driving resilient results, maintaining our strong balance sheet, generating free cash flow, and maximizing returns to our shareholders.

Andy Nemeth: We're focused on driving resilient results, maintaining our strong balance sheet, generating free cash flow, and maximizing returns to our shareholders. Thank you for your continued support.

Operator: Thank you for your continued support. Thank you.

Operator: Thank you. Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation, and you may now disconnect.

Operator: Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation, and you may now disconnect.

Operator: Thank you. Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation and you may now disconnect.

Speaker Change: and many more. I hope you enjoyed the video. I'll see you in the next one.