Q2 2025 Patrick Industries Inc Earnings Call

July 31, 2025

So 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 O'hara, Vice President of Investor Relations. Mr. Harris, you may begin.

Good morning, everyone and welcome to our call. This morning, I am joined on the call today by Andy Nemeth, CEO, Jeff Rodino, President RV and Andy <unk> 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 under.

<unk> 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 results to differ materially from those described in the fourth looking statements can be found in the company's annual report on Form 10-K for the year ended December 31 two.

<unk> 24, and the company's other filings with the Securities and Exchange Commission.

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

Thank you, Steve and good morning, everyone. We appreciate you joining us on the call today.

Our incredible team continued to deliver disciplined performance and results in the second quarter of 2025, despite very dynamic market conditions.

We produce topline growth of 3%, resulting in revenue of approximately $1 5 billion and on a trailing 12 month basis, approximately $3 8 billion.

Adjusted earnings per diluted share was $1 50 in the second quarter, including approximately <unk> <unk> of dilution from our convertible notes and related warrants.

To date as a result of our sales teams continued efforts and partnerships with customers and along with new product development and advanced product group efforts, we've secured over $100 million in new business tied to the 2026 model year and our outdoor enthusiast end markets.

We have a platform wins across multiple markets this quarter, including a recently developed composite roofing system for RV Oems are new pontoon tower, incorporating our own power Bimini system, and a new windshield program in power sports, which Jeff will touch on later on the call.

We are excited about the energy and momentum being created internally across our brand platform toward our full solutions model enhancing product integration and innovative design at scale.

The diversification of our portfolio continues to be a core strength, providing resilience across our business model in this dynamic environment.

<unk> tariff announcements resulted in a pause in consumer activity in our markets. However, we're encouraged that this appears to be a confidence related pause rather than a fundamental shift in underlying demand.

Just on recent commentary from leaders in the industries. We serve we believe people continue to enjoy the outdoor enthusiast lifestyle, which should create meaningful pent up demand across our end markets.

The sustained discipline at both the OEM and dealer level, and our RV Marine and power sports markets gives us confidence in our longer term trajectory as economic certainty improves and interest rates stabilize.

Sports, which Jeff will touch on later on the call.

As Andy will highlight we remain in a position of strength with a solid balance sheet and liquidity of $835 million, enabling us to execute on our capital allocation strategy with discipline and confidence.

We are excited about the energy and momentum being created internally across our brand platform toward our full solutions model enhancing product integration and innovative design at scale.

The diversification of our portfolio continues to be a core strength, providing resilience across our business model in this dynamic environment.

To that point, we are actively cultivating our acquisition pipeline and we continue to invest in automation and innovation, which includes advanced data analytics and AI driven capabilities further paving the way for a more efficient and profitable Patrick in the future.

April tariff announcements resulted in a pause in consumer activity in our markets. However, we're encouraged that this appears to be a confidence related pause rather than a fundamental shift in underlying demand.

Our strong cash flow generation balance sheet and liquidity position enable us to act quickly when opportunities align with our strategic and financial criteria.

Based on recent commentary from leaders in the industries. We serve we believe people continue to enjoy the outdoor enthusiast lifestyle, which should create meaningful pent up demand across our end markets.

While we continue to evaluate strategic opportunities. We are also returning value to shareholders as demonstrated in the second quarter through quarterly dividends of $13 million and over $23 million and share repurchases.

Looking to the back half of the year, we believe dealers will remain strategic in their approach to ordering likely waiting until the fourth quarter or first quarter of calendar year 2026 to begin meaningfully restocking.

Dealer inventories across our channels are lean Oems have maintained production discipline and we are strategically positioned to scale quickly and continue executing the long term vision that we outlined at our Investor Day last December.

Additionally, we have continued to invest in innovation and automation created our advanced product group and enhanced and launched our full solutions model. While also cultivating the next generation of talent that will take patricks into the next level.

Our strong cash flow generation balance sheet and liquidity position enable us to act quickly when opportunities align with our strategic and financial criteria.

We remain focused on executing on our capital allocation strategy optimizing our cost structure maximizing cash flow generation delivering best in class quality and service and continuing to innovate for both our OEM and growing aftermarket customer base.

This disciplined approach bolsters, the resilience of our model, while preserving our ability to capitalize on opportunities to outperform our end markets.

And finally in the second quarter, we welcome back our former CFO Jake pack of itch to the Patrick family as President of our Marine businesses.

Beyond this past success with the company Jake is an avid outdoor enthusiasts and we are confident that Jack's leadership will further advanced our full solutions model and the marine business, while solidifying our position as a market innovator and leader.

Rick Ranger prior precedent or marine and one of the architects of our Marine strategy remains an important member of the team acting as a strategic advisor.

We remain incredibly appreciative of Rick's dedication passionate service and commitment to the Patrick team vision and culture.

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.

This disciplined approach bolsters, the resilience of our model, while preserving our ability to capitalize on opportunities to outperform our end markets.

Looking closer at our end markets second quarter, RV revenue increased 7% to $479 million versus the same period in 2024, representing 46% of consolidated revenue.

And finally in the second quarter, we welcome back our former CFO Jake pack of itch to the Patrick family as President of our Marine businesses.

Our RV content per unit on a TTM basis was $4952, which was flat from the same period last year. Despite the continued heavy mix of smaller less content ad units.

Beyond this past success with the company Jake is an avid outdoor enthusiasts and we are confident that Jake's leadership will further advanced our full solutions model and the marine business, while solidifying our position as a market innovator and leader.

The improvement in RV revenue was driven by acquisitions and market share gains.

Rick Ranger prior precedent or marine and one of the architects of our Marine strategy remains an important member of the team acting as a strategic advisor.

RV content per unit on a quarterly basis increased 5% sequentially compared to the first quarter of 2025 and increased 6% year over year.

We remain incredibly appreciative of Rick's dedication passionate service and commitment to the Patrick team vision and culture.

We estimate RV retail and wholesale unit shipments were approximately 109600.

And 92900 units respectively in the second quarter.

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

This implies a seasonal dealer field inventory destock of approximately 16700 units in the quarter.

Thanks, Andy and good morning, everyone.

Looking closer at our end markets second quarter, RV revenue increased 7% to $479 million versus the same period in 2024, representing 46% of consolidated revenue.

Dealer inventory weeks on hand was approximately 19% to 21 weeks in the second quarter down slightly from 'twenty to 'twenty two weeks in the first quarter of 2025 and reflected continued wholesale production to retail sales discipline.

Our RV content per unit on a TTM basis was $4952, which was flat from the same period last year. Despite the continued heavy mix of smaller less content ad units.

This remains below pre pandemic historical averages of 26% to 30 weeks.

Within our RV business, we recently expanded our product offering to include baggage doors responding directly to specific customer demand by.

The improvement in RV revenue was driven by acquisitions and market share gains.

RV content per unit on a quarterly basis increased 5% sequentially compared to the first quarter of 2025 and increased 6% year over year.

By leveraging our existing fabrication capabilities utilizing our automation expertise and the raw materials materials, we already supply we have enhanced the quality and efficiency of those common components and rvs, while entering a new product category that expands our total addressable market.

We estimate RV retail and wholesale unit shipments were approximately 109600.

And 92900 units respectively in the second quarter.

This move highlights our ability to utilize our operational footprint scale and flexibility and highlights the value of our long standing customer relationships.

This implies a seasonal dealer field inventory destock of approximately 16700 units in the quarter.

Dealer inventory weeks on hand was approximately 19% to 21 weeks in the second quarter down slightly from 20% to 22 weeks in the first quarter of 2025 and reflected continued wholesale production to retail sales discipline.

Our second quarter Marine revenues were $156 million.

1% from the prior year outperforming an estimated 5% decrease in wholesale powerboat unit shipments.

Through the model year transition, we were able to win additional business in product categories, including electronics towers audio and other high engineered solutions, while bringing new customers in.

This remains below pre pandemic historical averages of 26% to 30 weeks.

Within our RV business, we recently expanded our product offering to include baggage doors responding directly to specific customer demand.

These wins position us to have a positive impact on our content per unit in the back half of the year and into 2026.

By leveraging our existing fabrication capabilities utilizing our automation expertise and the raw materials materials, we already supply we have enhanced the quality and efficiency of those common components and RV is while entering a new product category that expands our total addressable market.

Our estimated marine content per.

For wholesale powerboat unit on a TTM basis was $4012 an increase of 2% from the same period last year.

Estimated marine content per wholesale powerboat unit on a quarterly basis was up 2% sequentially compared to the first quarter of 2025 and increased 4% year over year.

This move highlights our ability to utilize our operational footprint scale and flexibility and highlights the value of our long standing customer relationships.

We estimate marine retail and wholesale powerboat unit shipments were 60 838000 units respectively in the second quarter.

Our second quarter Marine revenues were $156 million of just 1% from the prior year outperforming an estimated 5% decrease in wholesale powerboat unit shipments.

This implies a seasonal dealer field inventory destock of approximately 22800 units.

During the model year transition, we were able to win additional business in product categories, including electronics towers audio and other high engineered solutions, while bringing new customers in.

Dealer inventory in the field remains lean at an estimated 20 to 22 weeks on hand down from 26 to 28 weeks in the first quarter of 2025, and 22% to 24 weeks on hand last year at this time remaining well below the historical pre pandemic averages of 36% to 40 weeks.

These wins position us to have a positive impact on our content per unit in the back half of the year and into 2026.

Our estimated marine content.

For wholesale powerboat unit on a TTM basis was $4012 an increase of 2% from the same period last year.

Our power sports revenues were $96 million in the quarter compared to $104 million from the prior year period, representing 9% of our second quarter 2025 consolidated sales.

Estimated marine content per wholesale powerboat unit on a quarterly basis was up 2% sequentially compared to the first quarter of 2025 and increased 4% year over year.

We estimate wholesale power sports shipments were down year over year in the second quarter as Oems and dealers work to optimize inventory.

We estimate marine retail and wholesale powerboat unit shipments were 60 838000 units respectively in the second quarter.

We believe our positioning the power sports market remains advantageous given our emphasis on the utility side of the market, which has shown more resilience compared to the recreation side.

This implies a seasonal dealer field inventory destock of approximately 22800 units.

We see continued runway and power sports space in part grew to consumers' preference for creature comforts like HVAC, which requires the cabin closures or tech manufacturers.

As an example of organic content gains our sport Tech team recently added an incremental polycarbonate windshield solution and the golf cart market.

This program demonstrates how our integrated approach creates value for customers, while driving higher content per Patrick.

Our power sports revenues were $96 million in the quarter compared to $104 million from the prior year period, representing 9% of our second quarter 2025 consolidated sales.

On the housing side of our business, our second quarter revenues were up 3% to $315 million, representing 30% of consolidated sales.

We estimate wholesale power sports shipments were down year over year in the second quarter as Oems and dealers work to optimize inventory.

And manufactured housing, which represents approximately $15, 58% over housing revenues in the quarter, our estimated content per unit on a TTM basis increased 3% year over year to $6670.

We believe our positioning in the power sports market remains advantageous given our emphasis on the utility side of the market, which has shown more resilience compared to the recreation side.

MH wholesale unit shipments increased an estimated 3% in the quarter, while total housing starts decreased 1%.

We see continued runway and power sports space in part grew to consumers' preference.

Within housing are manufactured housing business continues to see relative stability.

Creature comforts like HVAC, which requires the cabin closures or tech manufacturers.

We continue to support our customers through a wide breadth of offerings in this space, while benefiting from a lean cost structure and the ability to scale most efficiently to serve our customers.

As an example of organic content gains our sport Tech team recently added an incremental polycarbonate windshield solution and the golf cart market.

We believe our focus on leveraging our depth and breadth of our product and brand portfolio to deliver our full solution strategy is continuing to create value for Patrick our customers and our shareholders.

This program demonstrates how our integrated approach creates value for customers, while driving higher content per Patrick.

On the housing side of our business, our second quarter revenues were up 3% to $315 million, representing 30% of consolidated sales and.

For Patrick it represents a significant opportunity to capitalize on the creativity and design capabilities of our team to integrate additional value added components value engineered savings and capture higher content per unit.

In manufactured housing, which represents approximately $15, 58% of our housing revenues in the quarter. Our estimated content per unit on a TTM basis increased 3% year over year to $6 $670.

For our customers, we believe it will deliver meaningful supply chain simplification and overall cost savings reduce risk through fewer vendor relationships improved quality through integrated design and faster time to market for new products.

MH wholesale unit shipments increased an estimated 3% in the quarter, while total housing starts decreased 1%.

Within housing are manufactured housing business continues to see relative stability.

This mutual value creation is the foundation of one office one of our sustainable competitive advantages.

We continue to support our customers through a wide breadth of offerings in this space, while benefiting from a lean cost structure and the ability to scale most efficiently to serve our customers.

Another example of our advanced product group penetration as a development and prototyping of an innovative <unk> solution that combines our adhesives roofing membranes and our recent investment in composite panels from three of our business units we.

We're in the final stages of prototyping.

And are preparing to supply to the industry in the back half of the year.

On the marine side of our business medallion instrumentation systems, whose digital display and dashboard dashboard capabilities solidify our ability to provide a complete electrical solution.

For our customers, we believe it will deliver meaningful supply chain simplification and overall cost savings reduced risk through fewer vendor relationships improved quality through integrated design and faster time to market for new products.

Which includes wiring fiberglass helms switches engages and a customizable digital dash, the consumers' favour and Oems can offer at a premium option.

Additionally, as Andy noted our team recently developed a proprietary power bimini system with our own actuator targeting multiple market categories, while still offering a good better best solution and a growing segment of the market.

This mutual value creation is the foundation of one office one of our sustainable competitive advantages.

Another example over of our advanced product group penetration as a development and prototyping of an innovated RV solution that combines our adhesives roofing membranes and our recent investment in composite panels from three of our business units.

I will now turn the call over to Andy <unk>, who will provide additional comments on our financial performance.

Thanks, Jeff and good morning, everyone. Our financial results in the second quarter were largely in line with our plan consolidated net sales for the quarter increased 3% to $1.05 billion.

We are in the final stages of prototyping and are preparing to supply to the industry in the back half of the year.

On the marine side of our business medallion instrumentation systems, whose digital display and dashboard dashboard capabilities solidify our ability to provide a complete electrical solution.

Driven by revenue increases of 7% in RMB and 3% in housing, which helped offset revenue declines of 1% and marine and 7% in power sports or.

Which includes wiring fiberglass helms switches engages and a customizable digital dash, the consumers' favour and Oems can offer at a premium option.

Our total revenue growth of 3% was comprised of 4% acquisition growth, 3% organic growth and negative 4% industry growth.

The organic growth consists of 2% share content gains and 1% related to pricing.

Gross margin was 23, 9% up 110 basis points from the same period last year, reflecting the positive impact of the diversification of our business model are margin accretive aftermarket acquisition of retro disciplined labor management and returns on our Capex and automation initiatives.

I will now turn the call over to Andy <unk>, who will provide additional comments on our financial performance.

Thanks, Jeff and good morning, everyone. Our financial results in the second quarter were largely in line with our plan consolidated net sales for the quarter increased 3% to 1.05 billion.

Operating margin was flat at eight 3% compared to the prior year quarter, driven by margin accretive acquisitions absorption from our RV and housing businesses offset by softer demand within our higher margin marine and power sports businesses.

Driven by revenue increases of 7% in RV and 3% in housing, which helped offset revenue declines of 1% marine and 7% in power sports.

Our overall effective tax rate was 25, 3% for the second quarter compared to 25, 6% in the prior year.

Our total revenue growth of 3% was comprised of 4% acquisition growth, 3% organic growth and negative 4% industry growth.

Net income decreased 32% to $32 million.

The organic growth consists of 2% share content gains and 1% related to pricing.

Or <unk> 96 per diluted share.

As noted in our release. This morning, we recently sold a non product related legal matter related to a motor vehicle accident, which resulted in a double fatality.

We extend our sympathies to the families of those involved for this tragic loss of life.

This settlement impacted our GAAP pre tax income and our GAAP net income given the nonrecurring nature of this settlement. We are also providing non-GAAP adjusted net income and earnings per share.

After adjusting for this nonrecurring item adjusted EPS increased 4% to $1 50 compared to $1 44 in the prior year period.

Additionally, our reported and adjusted diluted EPS for the second quarter of 2025 included approximately <unk> <unk> in additional accounting related dilution from our 2028 convertible notes and related warrants as a result of the increase in our stock price above the convertible option strike price.

Our overall effective tax rate was 25, 3% for the second quarter compared to 25, 6% in the prior year.

Net income decreased 32% to $32 million or <unk> 96 per diluted share.

As noted in our release. This morning, we recently sold a non product related legal matter related to a motor vehicle accident, which resulted in a double fatality.

The prior year's diluted EPS included <unk> <unk> per share.

As we've noted in the past we have hedges in place, which are expected to reduce or eliminate potential dilution to the companys common stock upon any conversion of the convertible notes <unk> offset any cash payments. The company is required to make an excess of the principal amount of any converted notes.

We extend our sympathies to the families of those involved for this tragic loss of life.

This settlement impacted our GAAP pre tax income and our GAAP net income given.

Given the nonrecurring nature of the settlement. We are also providing non-GAAP adjusted net income and earnings per share.

For accounting purposes. These hedges are always anti dilutive and therefore cannot be included when reporting earnings per share.

After adjusting for this nonrecurring item adjusted EPS increased 4% to $1 50 compared to $1 44 in the prior year period. Additionally.

Adjusted EBITDA grew 4% to $135 million, while adjusted EBITDA margin increased 10 basis points to 12, 9% for the second quarter of 2025.

Cash provided by operations for the first six months of 2025 was approximately $189 million compared.

Compared to $173 million in the prior year period and.

The prior year's diluted EPS included <unk> <unk> per share.

In purchases of property plant and equipment were $18 million in the quarter and $38 million year to date.

As we've noted in the past we have hedges in place, which are expected to reduce or eliminate potential dilution to the companys common stock upon any conversion of the convertible notes and or offset any cash payments. The company is required to make an excess of the principal amount of any converted notes.

This implies free cash flow of approximately $151 million for the first six months of 2025.

After repaying approximately $157 million in debt during the quarter total net liquidity at the end of the second quarter was $835 million.

For accounting purposes. These hedges are always anti dilutive and therefore cannot be included when reporting earnings per share.

Comprised of $22 million of cash on hand.

And unused capacity on our revolving credit facility of $813 million.

Adjusted EBITDA grew 4% to $135 million, while adjusted EBITDA margin increased 10 basis points to 12, 9% for the second quarter of 2025.

With no major debt maturities until 2028, we have the financial flexibility and dry powder necessary to capture long term organic and inorganic growth opportunities.

Cash provided by operations for the first six months of 2025 was approximately $189 million compared.

As Andy touched on earlier, we returned cash to shareholders through dividends and opportunistic share repurchases in the second quarter in total we repurchased 277800 shares at an average price of $84 43.

Compared to $173 million in the prior year period.

And purchases of property plant and equipment were $18 million in the quarter and $38 million year to date.

For a total of more than $23 million.

This implies free cash flow of approximately $151 million for the first six months of 2025.

Year to date through the end of the second quarter, we repurchased approximately 377600 shares for $32 million.

After repaying approximately $157 million in debt during the quarter total net liquidity at the end of the second quarter was $835 million.

At the end of the second quarter, we had approximately $168 million left on our repurchase authorization.

Comprised of $22 million of cash on hand.

At the end of the second quarter, our net leverage was two six times down from $2 seven at the end of the first quarter, we continue to allocate capital strategically, while maintaining a solid balance sheet and pursuing high value opportunities.

And unused capacity on our revolving credit facility of $813 million.

With no major debt maturities until 2028, we have the financial flexibility and dry powder necessary to capture long term organic and inorganic growth opportunities.

Regarding tariffs we have stated in the past that our total import exposure is approximately 15% of Cogs with one third China, <unk>, Canada, and Mexico, and one third rest of the world. We continue to Derisk, our exposure to China explore alternative sourcing options and monitor.

For a total of more than $23 million.

Tariff updates we.

We have previously outlined a number of tools at our disposal that we believe will help to mitigate the absolute impact to our pricing pass throughs and ultimately mitigate any material impact to our operating margin.

Year to date through the end of the second quarter, we repurchased approximately 377600 shares for $32 million.

At the end of the second quarter, we had approximately $168 million left on our repurchase authorization.

Moving to our end market outlook.

We estimate full year RV retail unit shipments will be down mid single digits, and we are tightening our estimated RV industry wholesale unit shipments to be 320 to 335000 units and continue to anchor on equivalent dealer inventory weeks on hand year over year.

Regarding tariffs we have stated in the past that our total import exposure is approximately 15% of Cogs with one third China, One third candidate in Mexico, and one third rest of the World. We continue to Derisk, our exposure to China explore alternative sourcing options and monitor.

In marine our estimates for our retail and wholesale powerboat unit shipments remain unchanged with retail shipments estimated to be down high single to low double digits, implying a low single digit decrease in wholesale unit shipments.

Again with equivalent dealer inventory weeks on hand year over year.

Tariff updates we.

And our power sports and market, we continue to estimate that wholesale industry shipments will be down low double digits and our organic content will be up high single digits as our content continues to grow given ongoing increasing attachment rates for our cabin closures.

Moving to our end market outlook.

And our housing market, we continue to estimate MH wholesale unit shipments will be up mid single digits for 2025.

On the residential side of the market. We continue to estimate 2025 total new site built housing starts will be down approximately 10% year over year.

Moving to our financial outlook, we continue to expect our full year 2025, adjusted operating margin to be between 7% and seven 3%.

We continue to estimate that our effective tax rate will be approximately 24% to 25% for 2025.

A year.

Implying a quarterly effective tax rate of approximately 26% for the remaining two quarters of the year.

Regarding the share count. Please note that the current share price is higher than in Q2, which if sustained would add additional accounting EPS related dilution going forward more so than we saw in Q2.

And our housing market, we continue to estimate MH wholesale unit shipments will be up mid single digits for 2025.

Following the legal settlement included in our second quarter results. We now expect that operating cash flow will be between $330 million to $350 million and our estimated capital expenditures will total $70 million to $80 million as we continue to reinvest in the business focusing on automation.

On the residential side of the market. We continue to estimate 2025 total new site built housing starts will be down approximately 10% year over year.

Moving to our financial outlook, we continue to expect our full year 2025, adjusted operating margin to be between 7% and seven 3%.

<unk> and innovation initiatives.

This implies free cash flow of at least $250 million.

We continue to estimate that our effective tax rate will be approximately 24% to 25% for 2025.

With the cyclical nature of our businesses. We believe it is important to remain well positioned.

Implying a quarterly effective tax rate of approximately 26% for the remaining two quarters of the year.

Balancing our commitment to deliver value to our shareholders and support customers at any demand level.

Should the macro or end market environment has changed significantly from our current expectations, we are prepared and ready to act accordingly.

That completes my remarks, we are now ready for questions.

Thank you for that.

Following the legal settlement included in our second quarter results. We now expect that operating cash flow will be between $330 million to $350 million and our estimated capital expenditures will total $70 million to $80 million as we continued to reinvest in the business focusing on automation.

Ill be conducting a question and answer session.

If you'd like to ask a question you May press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.

You May press star two we'd like to withdraw your question from the queue.

For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

And innovation initiatives.

One moment, please we poll for questions.

This implies free cash flow of at least $250 million.

The next question comes from the line of Joe <unk> with Raymond James.

With the cyclical nature of our businesses. We believe it is important to remain well positioned.

Thanks, Hey, guys good morning.

To talk about the end market outlook, you guys laid out this morning, not a ton changing but if I look at your RV Marine outlook for example, it sounds like Youre expecting.

<unk>, our commitment to deliver value to our shareholders and support customers at any demand level.

The macro or in market environment has changed significantly from our current expectations, we are prepared and ready to act accordingly.

Some slowdown in shipments and rvs in the second half at least versus what we saw in the first half and the opposite on the marine side, where youre expecting some increase in shipments in the second half. Despite the fact that demand is still pretty soft. So maybe can you talk us or walk us through how you're thinking about both of those end markets in the back half relative to.

That completes my remarks, we are now ready for questions.

Thank you for that.

We are conducting a question and answer session.

If you'd like to ask a question at this time you May press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.

Where we expect retail to be.

Yes. This is Jeff on the RV side with the production levels that we have.

Let me first start to we like to withdraw your question from the queue.

For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

We're looking at right now.

We are going to see the traditional seasonal.

One moment, please while we poll for questions.

<unk>.

Slowdown of production in the second half, where it while dealers try to work through their inventories and get their inventories and AR.

Thank you. Our first question comes from the line of Scott timber with Cros and Kam.

A better place we feel like inventories are very good.

Please proceed with your question.

We feel like our Oems have been very disciplined with their production levels to match up with retail.

Good morning, guys and thanks for taking my question.

Okay.

Good morning, John and Scott.

And so.

And by one moment gentlemen, we have to have Mr. Timbers line back.

So really in the second half I think that's kind of our normal seasonal change as we as we move through the third and fourth quarter.

Hey, Mr timber.

As far as.

Marine.

You saw a lot of a lot of product being pulled out of the inventory in the first half again inventories are very solid.

Since December please proceed.

Yes.

Across all of our markets, we feel like the Oems and the dealers have done a great job monitoring what retailers out there and only keeping the production levels, where they need to be to keep those inventories in check.

It sounds like.

Yes.

I think the technical issues with participants as Mr. <unk> line.

With as much it came out in the first half we believe there is a little bit of opportunity for some upside with the marine on the second half.

Yes, let's maybe move on to the next one sure.

Okay very helpful and just just to follow up on the cash flow outlook.

The next question comes from the line of Joe <unk> with Raymond James.

Is it.

Thanks, Hey, guys good morning.

Is the reduction purely the legal settlement or is there anything else going on there.

Talk about the end market outlook, you guys laid out this morning.

Yes, Scott this is Andy right now it's purely the legal settlement.

Tun changing if I look at your RV Marine outlook for example, it sounds like Youre expecting.

Not much has changed as you've noted in our end market outlook. So we pulled down our op cash guidance just based on that cash out the door due to the legal settlement.

Okay perfect. Thank you.

Thank you.

Demand is still pretty soft so maybe can you talk us or walk us through how you're thinking about both of those end markets in the back half relative to where we expect retail to date.

The next question is from the line of.

Daniel Moore with CJS Securities. Please proceed with your question.

Good morning, Thanks for color thanks for taking the questions.

Yes. This is Jeff on the RV side with the production levels that we have.

Good morning, Dan Good morning.

Start with.

Power sports.

We're looking at right now.

We are going to see the traditional seasonal.

Talk a little bit about.

Where inventories are today, both for the OEM and dealer level.

Slowdown of production in the second half, where it while dealers try to work through their inventories and get their inventories and AR.

And what are you hearing from your customers regarding retail demand any signs of getting closer to the bottom.

A better place we feel like inventories are very good.

We feel like our Oems have been very disciplined with our production levels to match up with retail.

Or do you see that weakness may be persisting into <unk> 26 in.

Secondarily, just talk about momentum on the attachment rates, obviously content growth.

And so.

So really in the second half I think that's kind of our normal seasonal change as we as we move through the third and fourth quarter.

As really healthy at high single digits.

As far as.

Demand for enclosures accelerating would you say penetration rates are sort of progressing steady any any updated color there would be great.

Marine.

You saw a lot of a lot of product being pulled out of the inventory in the first half again inventories are very solid.

Sure Dan I think as we look at the inventory in the channel we do feel like things are stabilizing there in the power sports market, we do feel like things are kind of.

Across all of our markets, we feel like the Oems and the dealers have done a great job monitoring what retailers out there and only keeping our production levels, where they need to be to keep those inventories in check.

Becoming more normalized as we look at our attachment rates I think that's where we're really optimistic we've seen an increase in attachment rates on units while unit. While unit production has gone down or attachment rates have gone up and I think one of the things that we're really optimistic about not only in power sports, but across all of our end markets as we look at kind of model year 2026.

With as much that came out in the first half. We believe there is a little bit of opportunity for some upside with the marine on the second half.

Okay very helpful and just just to follow up on the cash flow outlook.

Is it.

Is the reduction purely the legal settlement or is there anything else going on there.

Our model year 2027 is all the new product development that we've had in each of our markets and the additional content opportunities in gains that are out there for us as we look back half and into 2026.

Yes, Scott this is Andy Rater now it's purely the legal settlement.

Not much has changed as you've noted in our end market outlook. So we pulled down our op cash guidance just based on that cash out the door due to the legal settlement.

It's not just attachment rates, but it's additional products and product solutions that.

We have really come to fruition in the back half of 2027.

Okay perfect. Thank you.

Model year that we're really optimistic about.

Thank you.

Very helpful and that leads to my next question Love to hear a little more color on some of those products and systems that you described briefly I think you mentioned composite roofing system in RV, new bimini in marine and I kind of missed the new product or system and power sports but.

The next question is from the line of.

Daniel Moore with CJS Securities. Please proceed with your question.

Good morning, Thanks for the color thanks for taking questions.

Good morning, Dan Good morning.

To start with.

Power sports talk a little bit about.

Maybe any more color there.

How do you think that more generally the shift I think about the shift from products based company to more systems and solutions provider. How do you see that impacting your content growth as a whole over the next kind of three to five years.

Where inventories are today, both for the OEM and dealer level.

And what are you hearing from your customers regarding retail demand any signs of getting closer to the bottom.

Yes, Dan just start I mean, we believe that it's really what we need to do to continue to grow that content across all of our markets.

Or do you see that weakness may be persisting into 'twenty six.

Secondarily, just talk about momentum on the attachment rates, obviously content.

We put the advanced product groups for all of our our different markets and place in the last couple of years and we're starting to see the fruits of their labor and when we talk about the roofing system, we have three different divisions within.

<unk>.

As really healthy at high single digits.

<unk> for enclosures accelerating would you say penetration rates are sort of progressing steady and any any updated color there would be great.

Our RV markets that are working together to develop.

Sure Dan I think as we look at the inventory in the channel we do feel like things are stabilizing there in the power sports market, we do feel like things are kind of.

The products that can go together to give one nice roofing solution and a composite with a membrane in the adhesives. So as we've as.

Becoming more normalized as we look at our attachment rates I think that's where we're really optimistic.

As we've seen our APG group start to look across all of our capabilities. It helps them to understand exactly what we can put together and really simplify things for the customers and bring them a new solution again, helping our content per unit because in some cases. These are products that we don't have any it's not an addressable market for us currently.

<unk> seen an increase in attachment rates on units while unit, while unit production has gone down or attachment rates have gone up and I think one of the things that we're really optimistic about not only in power sports, but across all of our end markets. As we look at kind of model year 2026, and model year 2027 is all the new product development that we've had in each of our markets and the additional <unk>.

So we're getting into so we're not really cannibalizing any of our current business with portions of that.

Content opportunities in gains that are out there for us as we look back half and into 2026.

That system as far as the power Bimini and what we've done on the Marine side same thing our team has worked.

It's not just attachment rates, but additional products and product solutions that.

Have really come to fruition in the back half of 2027 model year that we're really optimistic about.

The last couple of years to find a solution that works.

Really to keep us in the market.

Within that <unk> and that power bimini solution with a good better best.

Very helpful and that leads to my next question Love to hear a little more color on some of those products and systems that you described it briefly I think you mentioned composite roofing system in RB new Bimini in marine and I kind of missed the new product or system and power sports, but maybe any more color there.

Solution for our customers and then the one thing I talked about was a polycarbonate.

Skus my windshield for golf carts that <unk> been working on something that they've worked with customers on to put together a new solution for the golf cart market.

Just how do you think more generally the shift think about the shift from products based company to more systems and solutions provider. How do you see that impacting your content growth as a whole over the next kind of three to five years.

And then as we look at moving the migration towards product solutions and our full solutions model based on the breadth and depth of our product portfolio. We really believe this is an additional opportunity to really partner with our customers.

Yeah, Dan I mean, just start I mean, we believe that it's really what we need to do to continue to grow that content across all of our markets.

Expand not only the good better best solution or offering for our customers, especially in this dynamic pricing environment related to tariffs and all the mitigation efforts, we can use on that front, but really to be able to value add value engineer products for customers to help them take cost out in these markets where affordability is.

We put a advanced product groups for all of our our different markets and place in the last couple of years and we're starting to see the fruits of their labor and when we talk about the roofing system, we have three different divisions within.

Our big concern today is we now so as we look at our solutions opportunities.

Our RV markets that are working together to develop.

And the really the opportunity there really embed our partnership even further with our customers. That's what gets us pretty excited again about where the content opportunities can lead to in the future.

The products that can go together to give one nice roofing solution and composite with a membrane in the adhesives, so as we've ever seen.

Helpful. I'll sneak in one more and then jump out, but just talk about the M&A pipeline number one and number two eight.

<unk> 800 million plus in liquidity.

Kind of in the mid two range in terms of leverage.

Your willingness to either take leverage higher for the right deals or.

So we're getting into so we're not really cannibalizing any of our current business with portions of that.

Prefer to work it down a little bit from here any thoughts on the balance sheet. Thanks again for the color.

That system as far as the power Bimini and what we've done on the Marine side same thing our team has worked.

Sure we feel like we're in a position of strength certainly in these market conditions with our liquidity our leverage position. The M&A pipeline continues to be actively cultivated I would say more so on the organic basis than the deal flow that we see from from investment bankers, but we're always actively cultivating.

The last couple of years to find a solution that works.

Really to keep us in the market.

Within that <unk> and that power bimini solution with a good better best.

Solution for our customers and then the one thing I talked about was a polycarbonate hub.

The organic deal pipeline and so again, we're out there we're talking to you to candidates today. So we're going to stay active in the M&A market, regardless of whether we're seeing investment banking deals or not but overall when we look at leverage as well. So in <unk>, we feel very comfortable with our cash flow the strength of our cash flows and the ability to delever will stretch.

Skus my windshield for a golf carts that <unk> been working on.

Something that they've worked with customers on to put together a new solution for the golf cart market.

That if we need to for the right deal a little bit above three times with the ideal and goal of getting back to two and a quarter to two five times within two to three quarters. So we can be very active in that but we feel very comfortable where we sit today as it relates to our liquidity position, our leverage position and the opportunities exist in the M&A market, especially through our organic cultivation efforts.

Thank you.

Our next question is from the line of Scott timber with Ross M. Kam. Please proceed with your question.

Our big concern today is we now so as we look at our solutions opportunities.

Can you guys hear me this time.

We actually Scott.

So yes.

Thanks for taking my questions.

And on pricing, what you're seeing right now for.

<unk> 26 in your discussions with the Oems with tariffs coming in there it doesn't seem like it's a tremendous impact for you, but just maybe talk about what you expect.

Helpful. I'll sneak in one more and then jump out, but just talk about the M&A pipeline number one and number two eight.

The inflation to be for next year, I know a lot of folks who maintained mid single digits.

800 million plus in liquidity.

Kind of in the mid two range in terms of leverage just your willingness to either take leverage higher for the right deals or sort of prefer.

And how does that affect your content expectations going forward for 2006.

Yes, Scott this is Jeff in general in partnership with our customers so far through the first half of the year.

Prefer to work it down a little bit from here any thoughts on the balance sheet. Thanks again for the color.

Pricing.

Relatively flat.

We've had to pass along a little bit here and there I think we will see some additional pricing in the second half as the tariff and increased pricing in the market starts to hit our inventories and will work directly with our customers and we are in contact with our customers to give them an idea of when and how much.

The organic deal pipeline and so again, we're out there.

I would say that low to mid single digits is kind of.

We're talking to candidates today, so we're going to stay active in the M&A market, regardless of whether we're seeing investment banking deals or not but overall when we look at leverage as well. So in <unk>, we feel very comfortable with our cash flow the strength of our cash flows and the ability to delever, we will stretch that if we need to for the right deal a little bit above three times with the <unk>.

I guess, a pretty good mark on where we would need to be in some of our product lines, that's not across the board and we're being very active as it.

As it relates to looking at our supply chain and making sure that we're mitigating as much increase as we can and we're seeing some of the increases out of domestic supply as well as what's going on with the tariffs. So it's kind of across the board and it's our team's working very hard to mitigate those and work with our our customers and our partners to make sure that we're keep.

Deal and goal of getting back to in a quarter to two five times within two to three quarters. So we can be very active in that but we feel very comfortable where we sit today as it relates to our liquidity position, our leverage position and the opportunities exist in the in the M&A market, especially through our organic cultivation efforts.

Those as low as possible.

Whatever that ends up being that will affect the content.

As we roll into 2026, as we get through the end of the year here and with the I'm going to say some low to moderate increases in some product categories.

Thank you.

Our next question is from the line of Scott timber with <unk>. Please proceed with your question.

Can you guys hear me this time.

Got it.

We actually got.

And then.

Did you guys give an update on your operating margin expectations for the full year.

So yes.

Thanks for taking my questions a question on pricing, what you're seeing right now.

Yes, Scott we kept it unchanged seven to seven 3% for the year.

For 2006, and your discussions with the Oems with Paris coming in there it doesn't seem like it's a tremendous impact for you, but just maybe talk about what you expect.

Got it.

And then lastly, maybe talk about the aftermarket obviously you have wrecked pro going on you have a lot of white space there as far as cross pollination efforts with Marine can you just talk about any wins there.

The inflation to be for next year, I know a lot of folks in maintaining mid single digits.

And how does that affect your content expectations going forward for 2006.

The status of that initiative.

Yes, Scott this is Jeff in general in partnership with our customers so far through the first half of the year.

Yes, Scott this is Jeff.

<unk> has done a great job connecting with all of our businesses across all of our markets just to get a sense and a feel for what products. They have available that need to be in the aftermarket are already in the aftermarket and how they can help increase the.

We've kept pricing.

Relatively flat we've.

We've had to pass along a little bit here and there I think we will see some additional pricing in the second half as the tariffs and increased pricing in the market starts to hit our inventories and will work directly with our customers and we are in contact with our customers to give them an idea of where.

The I guess the visibility of those products into the market across.

Not just the direct to consumer, which which retro is really good at but also in the dealers and in the distribution side.

When and how much.

I would say that low to mid single digits is kind of.

We've put a pretty hard push on them on the marine side with regards to getting out there into more distribution with our.

I guess, a pretty good mark on where we'd need to be in some of our product lines, that's not across the board and we're being very active as it as it relates to looking at our supply chain and making sure that we're mitigating as much increase as we can and we're seeing some of the increases out of domestic supply as well as what's going on with.

With our aftermarket products, but particularly.

Particularly in particular with retro we've added.

Well over 100 skus into.

Into the Rec Pro site.

Our from Patrick that puts us over 500 product.

Tariff so it's kind of across the board and it's our team's working very hard to mitigate those and work with our our customers and our partners to make sure that we're keeping those.

Excuse me Patrick Skus that are on retro so we're starting to get that exposure out there on that direct to consumer side, and we're putting more emphasis on aftermarket across our company we're putting.

As low as possible.

Whatever that ends up being that will affect the content.

Some additional structure in place to be able to really capitalize on what we think is a lot of white space. As you mentioned in your question. So we're excited about where we're at kind of everything that we know about what we can do in this space and where we're going.

As we roll into 2026, as we get through the end of the year here with I'm going to say some low to moderate increases.

Some product categories.

Got it.

And then.

Got it that's all I have thank you.

Did you guys give an update on your operating margin expectations for the full year.

Thanks Scott.

The next question is from the line of Craig Kennison with Baird. Please proceed with your questions.

Yes, Scott we kept it unchanged seven to seven 3% for the year.

Hey, good morning, you've addressed many of my questions, but I wanted to ask about.

Got it.

The RV shipment trends, we've seen lately may was down significantly in June was up what are you seeing in July and what's maybe the broader message.

The status of that initiative.

From the production side of the RV industry.

Yes, Scott this is Jeff.

Yes, Craig this is Jeff from the production side I think there's a few things in there with the the down in May up in June and where we are in July I will tell you in may as there was a lot of.

<unk> has done a great job connecting with all of our businesses across all of our markets just to get a sense and a feel for what products. They have available that media and the aftermarket are already in the aftermarket and how they can help increase the.

Transfer switch over from their 25% to 26 model year.

The I guess the visibility of those products into the market across.

Really we had a really light week over the memorial day week as a lot of those transitions were happening at the plant level.

Not just the direct to consumer, which which retro is really good at but also in the dealers and in the distribution side, we put a pretty hard push on them on the marine side with regards to <unk>.

June a little bit different than previous june's, a lot of the fourth of July shutdowns would happen with one week out at the end of June and one week out in July this year most of the Oems ran through the month of June and then took off the first two months of July which leads me to the other part of your question about July July is going to look like because of that.

Getting out there into more distribution with our.

With our aftermarket products, but particularly in particular with retro we've added.

Well over 100 S.

Skus into.

Into the Rec Pro site.

From Patrick that puts us over 500 product.

You've got two full weeks out of July production levels. However, I would tell you that the production levels that we're seeing moving forward at the last two weeks of July and into August seemed to be pretty consistent with where we left.

The pre July four shut down production levels, and we feel pretty good that the Oems again are being very disciplined with what theyre running versus what they're seeing on the retail side.

Thanks, Jeff and going back to the.

Advanced.

Products Group question line of questions I am just curious if we probe that a little bit are you.

Got it that's all I have thank you.

Thanks Scott.

You make a lot of acquisitions in and of themselves are generally very good businesses and you can grow them, but are you seeing more synergy.

The next question is from the line of Craig Kennison with Baird. Please proceed with your question.

Hey, good morning, you've addressed many of my questions, but I wanted to ask about the.

Synergies are more magic happen between or among those businesses as you try to create products that really you couldnt build if you didnt make acquisitions.

The RV shipment trends, we've seen lately may was down significantly and then June was up what are you seeing in July and what's maybe the broader message from from the production side of the RV industry.

I'll take that Craig This is Andy yet without question the energy amongst our brands and the excitement towards the opportunity to expand not only their product categories, but to bring a solution together, we've absolutely seen that we did our own internal product Expo to it make sure that all of our brands.

Yes, Craig this is Jeff from the production side I think there is a few things in there with the the down in May up in June and where we are in July I'll tell you in may as there was a lot of.

Awareness of the other product capabilities amongst our broad portfolio. So theres just a lot of excitement and I think the other the other thing that we think about especially in today's environment with shipments and the discipline that's out there.

Transfer switch over from their 25% 26 model year.

Really we had a really light week over the memorial day week as a lot of those transitions were happening at the plant level.

And retail wholesale production levels.

The tremendous efforts that have been put towards new product development in the last six to 12 months have been significant and the opportunities that we see being created especially with this pricing environment for us to bring these solutions together.

Really you are really an opportunity for us so I think the excitement amongst our brands. The continued education to keep them in the loop on all of our capabilities all of that is working in positive towards our advanced product group.

<unk> got two full weeks out of July production levels. However, I would tell you that the production levels that we're seeing moving forward at the last two weeks of July and into August seem to be pretty consistent with where we left.

Thanks, Andy and maybe just as a last question.

The pre July four shut down production levels, and we feel pretty good that the Oems again are being very disciplined with what theyre running versus what they are seeing on the retail side.

Looking at the tax legislation that just passed I'm. Just wondering are there any is there anything in there that might drive decisions I know for example, theres interest deductibility for total <unk> that should be good for the industry, but I'm wondering if maybe there are provisions that might.

Thanks, Jeff and going back to the.

Advanced.

Products group question line of questions.

In fact, how you think about capex or R&D decisions.

I'm just curious if we probe that a little bit are you.

Because of the legislation.

You make a lot of acquisitions in and of themselves are generally very good businesses and you can grow them, but are you seeing more.

I would say I don't know that theres any headwinds in that in that legislation only tailwind I think though as we look at our our cash flow it really hasnt changed our mindset in the way that we think about managing our business certainly again I think it's a tailwind versus a headwind.

Synergies are more magic happen between or among those businesses as you try to create products that really you couldnt build if you didnt make acquisitions.

And we will certainly look at opportunities there to stay opportunistic.

Overall, given the strength of our cash flows and the discipline inside our capital allocation strategy and the way that we think about our return models and I feel really good about our ability to continue to leverage the business regardless of the tax legislation, but again, if anything I would say its tailwind versus headwinds.

Great. Thanks, Andy.

Sure.

The next question is from the line of Tristan Thomas Martin with BMO Capital markets. Please proceed with your questions.

Hey, good morning.

And retail wholesale production levels.

Good morning, Jason.

How should we think about the margin profile of some of these higher engineered products and systems relative to some of your commoditized products.

Without question the higher engineered products have a better margin profile as we solution is I would say the the other side of that as we think about things is that again the ability to bring a good better best product offering to our customers I think that was we look at it it's a tremendous opportunity.

Really a really an opportunity for us so I think the excitement amongst our brands. The continued education to keep them in the loop on all of our capabilities all of that is working in positive towards our advanced products group.

Attunity to partner to help them take cost out while adding value in adding higher engineered products with our customers. So I think we can bring benefit to our customers in this affordability.

Thanks, Andy and maybe just as a last question.

Looking at the tax legislation that just passed I'm. Just wondering are there any is there anything in there that might drive decisions I know for example, theres interest deductibility for total bubbles that should be good for the industry and I'm wondering if maybe there are provisions that might.

We're sitting in an affordability issue right now in the marketplace.

We think we can bring a lot of value so but overall the margin profile is better on higher engineered products.

Affect how you think about capex or R&D decisions.

Okay, and then I know you called out dealers, probably waiting till <unk> won't give next year to meaningfully restocking what do you think they're looking for to start kind of ordering more volume or what are there signs that goes on.

Because of the legislation.

I'd say I don't know that there's any headwinds in that in that legislation only tailwind I think though as we look at our our cash flow.

Hum.

Right now I think the overall headline is affordability at the consumer level consumer traffic is there.

Really hasnt changed our mindset in the way that we think about managing our business certainly again I think it's a tailwind versus a headwind.

But consumers are looking for deals at least from everything that we've heard.

And we will certainly look at opportunities there to stay opportunistic but.

Overall, given the strength of our cash flows and the discipline inside of our capital allocation strategy and the way that we think about our return models and I feel really good about our ability to continue to leverage the business regardless of the tax legislation, but again, if anything I would say its tailwind versus headwinds.

In the marketplace and so I.

I think there is tremendous discipline. The other is the other headline dealer.

Wholesale production to retail retail sales unit sales is roughly at one one to one if not a little bit less and thats tremendous discipline in this space at the dealer level, but overall I think at least what we hear is just again affordability consumers are there.

Great. Thanks, Andy.

Sure.

Need a little we need some movement on interest rates, which certainly help things will move things along.

The next question is from the line of Tristan Thomas Martin with BMO Capital markets. Please proceed with your questions.

I think consumer confidence as well with all the volatility that we've seen in the last quarter is impact of the consumer and really kind of pause the consumer in the quarter. So hopefully as we get through that you know.

Hey, good morning.

Good morning, Jason.

How should we think about the margin profile of some of these higher engineered products and systems relative to some of your commoditize products.

Consumer confidence will improve and then hopefully we'll get some rate relief that will help as we move forward.

Without question.

Okay, and then I can just sneak in one more just.

<unk> the higher engineered products have a better margin profile as we solution is I would say the the other side of that as we think about things is that again the ability to bring a good better best product offering to our customers I think that was we look at it it's a tremendous opportunity to partner to help them take cost out.

In terms of thinking about kind of the industry mix shifts in the back half of 'twenty five 'twenty six is it strictly just affordability improves rates get cut consumers can afford more or is there any opportunity for the industry to innovate and try to encourage trade ups.

Relative to kind of what we are what we have before with all the single axle.

While adding value in adding higher engineered products with our customers. So I think we can bring benefit to our customers in this affordability.

Yes, I think it's going to be a combination of a few things certainly any macroeconomic help they can get interest relief.

To help with the affordability.

We're sitting in an affordability issue right now in the marketplace.

Continued innovation by the Oems to be able to add add components and add value to two units without adding a lot of costs and you'll work with them on on those those type of innovations.

We think we can bring a lot of value so but overall the margin profile is better on higher engineered products.

Okay, and then I know you called out dealers, probably waiting until <unk> I won't give next year to meaningfully restocking. What do you think they are looking for to start to kind of ordering more volume or what are there signs that scope.

But overall the second half of the year isn't going to be.

Much single axle I think as it has been.

But I don't think the.

Right now I think the overall headline is affordability at the consumer level consumer traffic is there.

Trend isn't going to change I should say, it's going to be the mix is going to be there I don't think it's going to get any different or any I'm going to say worse towards the single axle. So.

But consumers are looking for deals at least from everything that we've heard in.

I think as the affordability happens and we get into.

In the marketplace and so.

There's tremendous discipline and the other is the other headline dealer.

Kind of a core trade in and trade up cycle with some of the lifetime. Our viewers that I think have kind of held off as they waited for some affordability to happen will help and especially the interest rates will help them bring bring them back to the market as well.

Got it thank you.

We need a little we need some movement on interest rates would certainly help things will move things along.

Our next question is from the line of Mike Avenues with benchmark. Please proceed with your question.

Yes. Good morning, guys. Thanks for taking my question.

Just have a quick one here on rack pro and aftermarket exposure you, obviously highlighted some strong internal momentum.

<unk> covenants will improve and then hopefully we'll get some rate relief that will help as we move forward.

Adding skus are gaining DTC exposure I guess building the infrastructure.

Okay, and then I'll just sneak in one more just.

Now from your seats I mean, how much visibility do you have or is that large enough for you to get a read through into overall kind of aftermarket demand and I guess from your seat what are you seeing in terms of end market activity overall usage etsy.

In terms of thinking about kind of the industry mix shifts in the back half of 'twenty five 'twenty six.

Strictly just affordability improves rates get cut consumers can afford more or is there any opportunity for the industry to innovate and try to encourage trade ups.

Et cetera, if you could just comment on that would be great.

Relative to kind of what we are where we are before with all the single axle.

Yes, it does give us a good view into the aftermarket we have been able to kind of look at that I mean, it hasnt been.

Yes, I think it's going to be a combination of a few things certainly any macroeconomic help they can get interest relief.

As far as year over year, it's been up.

I can't tell you if it's been up across the board with everybody with the aftermarket I mean, some of the aftermarket is specifically attachment to new units and if retail is down and some of that aftermarket will get a little bit slower.

To help with the affordability I think continued innovation by the Oems to be able to add add components and add value to two units without adding a lot of cost and your work with them on on those those types of innovations.

I mean, it really does give us an opportunity to understand a lot more about what's happening in the aftermarket they have a as I mentioned there is over 500, Patrick Skus on the retro site.

But overall the second half of the year isn't going to be.

As much.

<unk> I think as it has been.

Which they have a broad breadth of product across many many different product categories outside of Patrick So we can kind of see.

But I don't think the the.

Trend isn't going to change I should say, it's going to be the mix is going to be there I don't think it's going to get any different or any I'm going to say worst towards the single axle. So.

What's what's being bought out in the market and what's I guess, what's hot and what's not on the aftermarket side.

I think as the affordability happens and we get into.

So overall I mean, we feel good about kind of our visibility in what's happening there and we will continue to you use utilized retro as that that visibility into the market. We do have other channels within our other markets in marine and even within RV, where we're selling through distribution and into dealers.

Kind of a core trade in and trade up cycle with some of the lifetime, our beers that I think kind of held off as they waited for some affordability to happen, we'll help them, especially the interest rates will help them bring bring them back to the market as well.

Got it thank you.

That continues to give us good visibility on those those channels.

Yeah.

Our next question is from the line of Mike Avenues with benchmark. Please proceed with your question.

Got it that's helpful. So I guess, just as a follow up and maybe to take the question a step further I mean, you mentioned.

Hey, good morning, guys. Thanks for taking my question.

A lot of it attachment tied that into new unit, but.

Just have a quick one here on rack throw in aftermarket exposure you, obviously highlighted some strong internal momentum.

I'm trying to get a sense of the product portfolio here and how much benefit you would get maybe from an increase in the used market.

Adding skus are gaining DTC exposure I guess building the infrastructure.

And obviously just general activity kind of gone hand in hand with that.

From your seat I mean, how much visibility do you have or is that large enough for you to get a read through into overall kind of aftermarket demand and I guess from your seat what are you seeing in terms of end market activity overall usage.

Within your.

Fitness that makes sense, yes, I don't know I don't know if I don't think I meant to imply that the majority of what we had was attachment for new units I am just saying that within aftermarket some of the products are attachment to new unit. The majority of the product categories that we have are for upgrade.

Et cetera, if you could just comment on that would be great.

Yes, it does give us a good view into the aftermarket we have been able to kind of look at that I mean, it hasnt been.

Refurbish of Rovs versus.

As far as year over year, it's been up.

Something that's only going to happen on a new retail units so.

That's where we're going to see the majority of the sales that come out of out of retro in any of our other direct to consumer products.

Got it that's helpful. I appreciate it guys.

Thank you.

I mean, it really does give us an opportunity to understand a lot more about what's happening in the aftermarket they have a as I mentioned there is over 500, Patrick Skus on the retro site.

The next question is from the line of Noah <unk> with Keybanc capital markets. Please proceed with your question.

Hi, Thanks for taking my question.

Most have been asked and answered, but maybe just one on power sports.

Which they have a broad breadth of product across many many different product categories outside of Patrick So we can kind of see.

There was a major OEM, who recently announced.

That retail.

What's what's being bought out in the market and what's I guess, what's hot and what's not on the aftermarket side.

You Tvs was positive in the second quarter, obviously your wholesale shipments for power sports are unchanged at download double digits. So just kind of wondering how youre thinking about that dynamic and maybe.

When when maybe inventories in a better spot and dealers kind of want to begin restocking there how are you.

That continues to give us good visibility on those those channels.

You're thinking about kind of timing.

Given that there appears to be pretty resilient demand for those products.

Got it that's helpful. So I guess, just as a follow up and maybe to take the question a step further I mean, you mentioned.

A lot of it attachment tied to new units, but.

I'm trying to get a sense of the product portfolio here and how much benefit you would get maybe from an increase in the used market.

Lee has outweighed that in the recreational side of the business that being said I.

And and obviously just general activity kind of go hand in hand with that.

I think we're still kind of anchored around our model year 'twenty seven.

Within your.

Fitness that makes sense, yes, I don't know I don't know if I don't think I meant to imply that the majority of what we had was attachment for new units I'm, just saying that within aftermarket some of the products are attachment to new unit. The majority of the product categories that we have are for upgrade and refurbish of rvs.

Units and really that that kind of being the baseline increase for us on a production level as we head into 2026 for the 27 model year. So we're still pretty consistent.

<unk> kind of flat down a little bit.

But but stabilizing inventories out there and in the utility side, we don't feel like utility inventories are out of balance so.

Versus you know.

Something thats only going to happen on a new retail unit so.

So I think again as we look at the back half of really haven't changed much of our thoughts as it relates to increased production levels were still kind of thinking hey, it's going to be late this year and into next year, but the new content opportunities again that we've talked about in addition to the increasing attachment rates.

That's where we're going to see the majority of the sales that come out of <unk> and any of our other direct to consumer products.

Got it that's helpful. I appreciate it guys.

Thank you.

Give us optimism for the 2026 calendar year of 2027 model year.

The next question is from the line of Noah <unk> with Keybanc capital markets. Please proceed with your question.

Thanks, maybe just just one more.

Hi, Thanks for taking my question.

Not to get kind of too detailed on power sports, but.

Most have been asked and answered, but maybe just one on power sports.

There was a major OEM, who recently announced.

What percentage of the business would you would you say is index to utv's versus like golf carts or.

That retail.

For you you Tvs was positive in the second quarter, obviously your wholesale shipments for power sports are unchanged at download double digits. So just kind of wondering how youre thinking about that dynamic and maybe.

Kind of kind of other types of products.

And then like maybe yeah.

Not to harp on golf carts, but like.

Are there other pieces within that business that are growing.

Growing.

When when maybe inventories in a better spot.

Even faster.

It's a little bit fragmented, but just in general if you think UTV to two rack, probably 60 40, 60% <unk> TV, 40%.

Dealers kind of want to begin restocking there.

Are you thinking about kind of timing.

Given that there appears to be pretty resilient demand for those products.

Back then the golf cart market for Us is I.

Sure No I think as we look at our backlogs in our order patterns, we have some decent visibility into kind of where we see production levels and saw the resilience and the utility side of the business now certainly has outweighed that in the recreational side of the business that being said.

I don't want say, it's untapped, we're hitting it but theres a ton of potential there as it relates to content opportunities.

Audio as well and then any even into the motorcycle market, where we participate heavily on the audio side that plays into the power sports. So it's somewhat fragmented within the entire power sports market, but our categories are generally going to be.

We're still kind of anchored around.

Model year 2007.

The Tvs Utv's motorcycles.

And really that that kind of being the baseline increase for us on a production level as we head into 2026 for the 27 model year. So we're still pretty consistent.

Golf carts.

Watercraft, those that's really where we play on the power sports side.

Thanks very helpful.

Thanks.

We're expecting kind of flat.

Thank you.

Down a little bit.

At this time I will now turn the call back to Andy Nemeth for closing remarks.

But but stabilizing inventories out there and in the utility side, we don't like utility inventories are out of balance so.

Thank you everybody, we really want to thank our more than 10000 team members out there. They have just worked.

So I think again as we look at the back half, but really haven't changed much of our thoughts as it relates to increased production levels were still kind of thinking hey, it's going to be late this year and into next year, but the new content opportunities again that we've talked about in addition to the increasing attachment rates.

So hard and their dedication and discipline and diligence in these dynamic conditions has been incredibly inspiring and energizing. We also want to thank our customers for their support and their partnerships in these volatile times, but again, hopefully we continue to really embed ourselves as a valued partner, which is our goal.

Give us optimism for the 2026 calendar year of 2027 model year.

Thanks, maybe just just one more.

Again, as I think about where we had as we look into the back half of the year and into next year. We remain really energized about the opportunities that are in front of us the earnings power of the business.

Not to get kind of too detailed on power sports, but.

What percentage of the business would you would you say is index to utv's versus like golf carts or.

The team that we've got in place today, the customer partnerships that we have and really the ability to positively impact lies not only in our markets, but in our communities and so can we feel good about where we're at and the team has done a great job and we're incredibly appreciative of the opportunities that we have in front of us. So I want to thank you again really appreciate everybody's.

Kind of kind of other types of products.

And then like maybe yeah.

Not to harp on golf carts, but like.

Are there other pieces within that business better.

Growing.

Even faster.

Participation and we look forward to talking to you next quarter.

It's a little bit fragmented, but just in general if you think UTV to two rack, probably 60 40, 60% <unk> 40%.

Thank you ladies and gentlemen. This concludes today's teleconference. Thank you for participating and you may now disconnect.

Back then the golf cart market for Us is I.

Don't want to say, it's untapped, we're hitting it but theres a ton of potential there as it relates to content opportunities.

Audio as well and then even into the motorcycle market, where we participate heavily on the audio side. We've played into the power sports. So it is somewhat fragmented within the entire power sports market, but our categories are generally going to be.

Tvs <unk> Tvs motorcycles.

Golf carts.

Watercraft, those that's really where we play on the power sports side.

Thanks very helpful.

Thanks.

Thank you.

At this time I will now turn the call back to Andy Nemeth for closing remarks.

Thank you everybody, we really want to thank our more than 10000 team members out there. They have just worked.

So hard and their dedication and discipline and diligence in these dynamic conditions has been incredibly inspiring and energizing well I want to thank our customers for their support and their partnerships in these volatile times, but again, hopefully we continue to really embed ourselves as a valued partner, which is our goal.

Again, as I think about it where we had as we look into the back half of the year and into next year. We remain really energized about the opportunities that are in front of us the earnings power of the business.

The team that we've got in place today, the customer partnerships that we have and really the ability to positively impact lies not only in our markets, but in our communities and so again, we feel good about where we're at the team has done a great job and we're incredibly appreciative of the opportunities that we have in front of us. So I want to thank you again really appreciate everybody's.

Participation and we look forward to talking to you next quarter.

Thank you ladies and gentlemen. This concludes today's teleconference. Thank you for participating and you may now disconnect.

Q2 2025 Patrick Industries Inc Earnings Call

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