PATRICK INDUSTRIES INC Q1 FY2025 earnings call

• Our first quarter performance was largely in alignment with plan, due to diversified business strategy and strong operational execution.
• Saw production increases and restock in RV and MH markets, with Marine and Powersports down slightly year-over-year. Had sequential quarterly content gains in RV and Marine due to market share capture and mix favorability.
• Completed 2 acquisitions in the quarter and repurchased approximately $8.5 million of stock. Focused on cost and working capital management, operating improvements, and product innovation.
• First quarter produced top line growth of 7%, resulting in revenue of approximately $1.0 billion. Earnings per diluted share were $1.11. Team drove organic growth of 2% net of pricing in Q1.

Consolidated first quarter net sales increased 7% to $1.0 billion. RV revenues increased 14% to $479 million, representing 48% of consolidated revenue. Housing revenues were up 7% to $295 million, representing 29% of consolidated sales. Marine revenues were $149 million, up 4% from the prior year, representing 14.9% of consolidated sales. Powersports revenues were $81 million in the quarter, up 2% from the prior year period, representing 8% of first quarter 2025 consolidated sales. On a trailing 12-month basis, revenue was approximately $3.8 billion. Earnings per diluted share were $1.11, including approximately $0.05 of dilution from convertible notes and related warrants. Organic growth was 2% net of pricing in the first quarter.

• Now estimate full year RV retail unit shipments will be down mid-to-high single digits, implying wholesale unit shipments of approximately 310,000 to 330,000. Previously assumed flat retail shipments.
• In Marine, now expect retail to be down high-single to low double digits versus prior flat outlook, implying low single digit decrease in wholesale unit shipments.
• In Powersports, expect organic content to be up high single digits despite industry shipments down low double digits.
• In housing, estimate MH wholesale unit shipments will be up mid-single digits for 2025 versus up 10% to 15% previously. Residential housing starts estimated down approximately 10% year-over-year versus previous flat to up 5% estimate.
• Effective tax rate expected to be approximately 24% to 25% for 2025, implying quarterly effective tax rate of approximately 26% for remaining 3 quarters.
• Operating cash flow expected between $350 million to $370 million. Capital expenditures estimated to total $70 million to $80 million. Free cash flow at least $270 million.
• Full year 2025 adjusted operating margin expected to be approximately 7.0% to 7.3%.

• Macro-economic environment uncertainty impacting end markets. Tariff headlines causing uncertainty in markets. Consumer confidence decline affecting discretionary spending. Market fluctuations and volatility posing challenges to business operations.

Q: Maybe just to start on tariffs. And I think the -- hopefully, I’m doing the math correctly. But I think based on what you said, maybe the gross exposure to tariffs as they stand today is somewhere in the $250 million neighborhood. One, I guess, is that correct? And then two, I guess, how much are you anticipating being offset? How much of that do you expect to flow through is built in your guidance here for 2025?

A: This is Andy Roeder. I can take a stab at this. Certainly, tariffs, dynamic environment. The team is all over it, though, identifying the changing regs as well as the exclusions, identifying potential cost impact by country, by product category. From a company-wide perspective, we’ve said 5% of our COGS are imported from China, 5% from Canada and Mexico and then 5% from rest of the world. So I think you can do the math there. I think your $250 million is a little low. But I think just in terms of offsets, I mean, our goal is to do everything we can to mitigate the impact to our customers. We have many levers at our disposal. We’re looking at alternative sourcing options, of course, using our scale, some strategic sourcing that we have, some here, some overseas. But we’re going to remain nimble, be thoughtful about cost reductions, inventory management. China certainly is our biggest risk and that’s where we’re moving the fastest. And again, I think we can move about half of our exposure in China.

Q: Okay. That’s helpful. And I didn’t hear in your statements there, anything about pricing. And I think some of the OEMs, some of the dealers have talked about maybe a mid-single digit price increase for model year ‘26. I mean, I guess how much do you expect to use pricing as a lever to offset some of the tariff load?

A: Yes, Mike, this is Jeff. We are going to look at our pricing as we get it in. We’re not just randomly throwing out price increases just because there’s tariff discussion in the market. We’re being very thoughtful about where we’re at. We’re talking closely with all of our customers going through line by line, where we can mitigate costs, where we can use our good, better, best model possibly to mitigate some of the tariffs. So it’s a line-by-line item that we’re doing. And there is going to be some cost that gets passed along. Certainly, some of the early tariffs from China, the 10 plus 10 is something that’s out there. I can’t speak directly to what increases our OEMs are putting on their products into the market. They’d have to talk about that. But certainly, we’re being very thoughtful as we discuss all of their new products as they go into model change. I think you’re aware that the model change is June 1 versus July 1. So a lot of those discussions have been going on through March and April to prepare for production starting end of May and into June.

Q: Okay. That’s super helpful. And maybe just one last from me. One of the big dealers was out talking about maybe product mix being a little more dilutive this year than expected. So I mean, I guess, are you seeing in the production runs from some of your customers? And I guess what are your expectations relative to maybe content relative to the mix headwind that we’ve seen in this industry playing out maybe over the next 12 months?

A: Yes, Mike, this is Jeff again. We have seen the mix kind of stay stable from where we were at the end of 2024 into 2025 with regards to small entry-level units. We haven’t seen a lot of de-contenting going on throughout the market from low end to high end. We have seen some additional high-end being built out there, but certainly, it’s offset by the entry-level product that’s out there. So I mean, we continue to believe that’s going to be kind of where people are going to go to, to start to get people back on the lots as some of these macroeconomic dynamics change. But I think we feel pretty good about the -- I guess, the mix not getting any significantly different than what it is today.