Patrick Industries, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Overall Performance: The company achieved top line growth of 3% to $1.05 billion in Q2 2025, with adjusted earnings per diluted share of $1.50. Over $100 million in new business tied to the 2026 model year in outdoor enthusiast markets was secured.
• Product Developments: Developed a composite roofing system for RV OEMs, a Power Bimini pontoon tower, and a polycarbonate windshield for golf carts.
• Portfolio Diversification: Strong balance sheet with $835 million liquidity; actively cultivating an acquisition pipeline and investing in automation/innovation, including advanced data analytics and AI-driven capabilities.
• Market Conditions: April tariff announcements caused a consumer pause, but it was confidence-related with pent-up demand expected. OEM and dealer discipline provides confidence in the longer-term trajectory.
• Advanced Product Group: Penetration through development of innovative solutions, integrating product groups across divisions for value-added offerings, e.g., combining adhesives, roofing membranes, and composite panels for RV roofing.

Segment Performance

• RV: Second quarter revenue was $479 million, representing 46% of consolidated revenue. RV content per unit on a TTM basis was flat, with a 5% sequential increase and 6% year-over-year increase in the quarter. Estimated retail and wholesale unit shipments were approximately 109,600 and 92,900 units, respectively.
• Marine: Second quarter revenue was $156 million, down 1% from the prior year. Estimated marine content per wholesale Powerboat unit on a TTM basis increased 2%, with a 2% sequential increase and 4% year-over-year increase in the quarter. Estimated retail and wholesale Powerboat unit shipments were 60,800 and 38,000 units, respectively.
• Powersports: Revenue was $96 million, representing 9% of Q2 2025 consolidated sales. Wholesale powersports shipments were down year-over-year. Focus on the utility side of the market, with organic content gains like a polycarbonate windshield for golf carts.
• Housing: Revenue was $315 million, representing 30% of consolidated sales. Housing revenues were up 3%. Estimated content per unit in manufactured housing on a TTM basis increased 3% year-over-year. MH wholesale unit shipments increased 3% in the quarter, while total housing starts decreased 1%.

Guidance

• Full Year 2025: Adjusted operating margin expected to be between 7% and 7.3%. Effective tax rate for 2025 estimated 24% to 25%. Operating cash flow expected $330 million to $350 million, capital expenditures $70 million to $80 million, resulting in free cash flow of at least $250 million.
• End Market Outlook: RV wholesale unit shipments expected 320,000-335,000; Marine retail/wholesale powerboat unit shipments unchanged; Powersports wholesale shipments down low double digits, organic content up high single digits; Housing MH wholesale unit shipments up mid-single digits, residential housing starts down 10%.

Risks

• Tariffs: Import exposure (~15% of COGS) with 1/3 from China, 1/3 Canada/Mexico, 1/3 rest of world. Need to derisk China exposure and monitor tariff updates.
• Macro Environment: Cyclical nature of businesses; significant change in macro or end market environments could require strategic actions.

Question and Answer

• Q: Talk about end market outlook, particularly RV and Marine in back half A: Jeff Rodino says RV has traditional seasonal slowdown in second half, Marine may see upside as inventories are solid.
• Q: Cash flow outlook, cause of reduction A: Andy Roeder says reduction purely due to legal settlement.
• Q: Powersports inventories, retail demand, attachment rates A: Andy Nemeth says inventories stabilizing, attachment rates increasing, new product developments for 2026/2027 model years.
• Q: Products/solutions shift, operating margin, aftermarket A: Jeff Rodino and Andy Nemeth discuss advanced product groups, operating margin unchanged 7%-7.3%, RecPro adding SKUs and DTC exposure.
• Q: RV shipment trends, Advanced Product Group synergies, tax legislation, RecPro aftermarket A: Jeff Rodino talks about RV production trends, Andy Nemeth on APG synergies, Andy Nemeth on tax legislation tailwinds, Jeff Rodino on RecPro aftermarket visibility.
• Q: Powersports mix, RecPro aftermarket usage **A: Andy Nemeth on powersports mix (60% UTV, 40% Rec), Jeff Rodino on RecPro aftermarket visibility and insights.