ELKHART, Ind. – Patrick Industries, Inc. (NASDAQ: PATK), a leading component solutions provider for the Outdoor Enthusiast and Housing markets, today reported financial results for the third quarter and nine months ended Sept. 29.
Third Quarter 2024 Highlights (compared to Third Quarter 2023 unless otherwise noted)
- Net sales increased 6% to $919 million driven by a 13% increase in Housing revenue and our first quarter acquisition of Sportech, which together more than offset a 21% decline in Marine revenue.
- Operating margin decreased 10 basis points to 8.1%. For the first nine months of 2024, adjusted operating margin improved 20 basis points to 7.8%.
- Net income increased 3% to $41 million. Diluted earnings per share of $1.80 included the dilutive impact of our convertible notes and related warrants in the period, or an estimated $0.06 per share. For the first nine months of 2024, adjusted diluted earnings per share increased 13% to $5.75.
- Adjusted EBITDA increased 7% to $121 million; adjusted EBITDA margin increased 10 basis points to 13.2%.
- Cash flow provided by operating activities was $224 million for the first nine months of the year compared to $294 million in the same period last year. Free cash flow, on a trailing twelve-month basis, was $277 million.
- Completed the acquisition of RecPro, which significantly increases our penetration into the RV aftermarket, while also providing synergy opportunity for our Marine and Powersports end markets to sell through a more advanced aftermarket distribution channel.
- Maintained solid balance sheet and liquidity position, ending the third quarter with a total net leverage ratio of 2.6x following the acquisition of RecPro and liquidity of $458 million.
- Subsequent to quarter end, the Company amended and extended the maturity of its credit facility, and also issued $500 million aggregate principal amount of 6.375% Senior Notes due 2032. The Company plans to redeem its 7.500% Senior Notes due 2027 with a portion of the proceeds.
- Patrick plans to host an investor day in New York City on December 3, 2024.
Net sales increased 6% to $919 million, an increase of $53 million compared to the third quarter of 2023. The growth in net sales was due to a 13% increase in Housing revenue coupled with revenue gains from our Sportech acquisition, which closed in January of this year. These factors more than offset a 21% decline in Marine revenue as marine OEMs as well as OEMs across our other Outdoor Enthusiast markets continued to maintain highly disciplined production schedules in an effort to manage dealer inventory in alignment with current end market demand
Operating income of $74 million in the third quarter of 2024 increased $3 million, or 5%, compared to $71 million in the third quarter of 2023. Operating margin of 8.1% decreased 10 basis points compared to 8.2% in the same period a year ago, reflecting higher SG&A expenses and amortization costs related to acquisitions. For the first nine months of 2024 compared to the same period in 2023, excluding acquisition transaction costs and purchase accounting adjustments in both periods, adjusted operating margin improved 20 basis points to 7.8%.
Net income increased 3% to $41 million, compared to $40 million in the third quarter of 2023. Diluted earnings per share of $1.80 in the third quarter of 2024 included approximately $0.06 of dilution from our convertible notes and related warrants. There was no dilutive impact from the convertible notes in the third quarter of 2023. For the first nine months of 2024 compared to the first nine months of 2023, excluding acquisition transaction costs and purchase accounting adjustments in both periods, adjusted net income increased 14% to $128 million and adjusted diluted earnings per share increased 13% to $5.75. Diluted earnings per share for the first nine months of 2024 included approximately $0.10 of dilution from our 2028 convertible notes and related warrants. The prior year period included approximately $0.05 of dilution related to our 1.00% Convertible Senior Notes due 2023, which were repaid in cash in February 2023.
“The Patrick team delivered another quarter of solid results with revenue and net income growth supported by the continued diversification of our business,” said Andy Nemeth, Chief Executive Officer. “The resilience of our model is directly related to the dedication and talent of our incredible team members, and the strategic investments we have made enabling Patrick to perform well during a prolonged period of inventory destocking that has continued to affect our Outdoor Enthusiast end markets at different times over the last two years.”
Jeff Rodino, President — RV, said, “This quarter, we welcomed RecPro into our family of brands, which meaningfully expands our position in the direct-to-consumer RV and enthusiast aftermarket. We are energized by the depth and breadth of their product offering, the synergies across our business, and their tremendous leadership and expertise in e-commerce and aftermarket sales. We believe RecPro’s efficient distribution channel and significant consumer reach will substantially enhance our ability to provide Patrick’s valuable aftermarket solutions across all of our end markets.”
Third Quarter 2024 Revenue by Market Sector
(compared to Third Quarter 2023 unless otherwise noted)
RV (43% of Revenue)
- Revenue of $396 million decreased 1% while wholesale RV industry unit shipments increased 6%.
- Content per wholesale RV unit (on a trailing twelve-month basis) decreased by 1% to $4,887. Compared to the second quarter of 2024, content per wholesale RV unit (on a trailing twelve-month basis) decreased 2%.
Marine (15% of Revenue)
- Revenue of $136 million decreased 21% while estimated wholesale powerboat industry unit shipments decreased 23%. Our Marine end market revenue previously included Powersports revenue, which we began to report separately following the Sportech acquisition. End market revenue and content per unit reflect this change for the relevant periods.
- Estimated content per wholesale powerboat unit (on a trailing twelve-month basis) decreased 6% to $3,936. Compared to the second quarter of 2024, estimated content per wholesale powerboat unit (on a trailing twelve-month basis) was flat.
Powersports (10% of Revenue)
- Revenue of $87 million increased 204%, driven primarily by the acquisition of Sportech in the first quarter of 2024.
Housing (32% of Revenue, comprised of Manufactured Housing (“MH”) and Industrial)
- Revenue of $300 million increased 13%; estimated wholesale MH industry unit shipments increased 17%; total housing starts decreased 3%.
- Estimated content per wholesale MH unit (on a trailing twelve-month basis) increased 1% to $6,518. Compared to the second quarter of 2024, estimated content per wholesale MH unit increased 1%.
Balance Sheet, Cash Flow and Capital Allocation
For the first nine months of 2024, cash provided by operating activities was $224 million compared to $294 million for the prior year period, with the change primarily driven by investments in working capital. Purchases of property, plant and equipment totaled $18 million in the third quarter of 2024, reflecting maintenance capital expenditures and continued investments in alignment with our automation and technology initiatives. On a trailing twelve-month basis, free cash flow through the third quarter of 2024 was $277 million, compared to $412 million through the third quarter of 2023 when we aggressively monetized working capital in a declining sales environment. Our long-term debt increased approximately $70 million during the third quarter of 2024, primarily as the result of the RecPro acquisition, which closed on September 6, 2024.
We remained disciplined in allocating and deploying capital, returning approximately $12 million to shareholders in the third quarter of 2024 through dividends. We remain opportunistic on share repurchases and had $78 million left authorized under our current share repurchase plan at the end of the third quarter.
Our total debt at the end of the third quarter was approximately $1.4 billion, resulting in a total net leverage ratio of 2.6x (as calculated in accordance with our credit agreement). Available liquidity, comprised of borrowing availability under our credit facility and cash on hand, was approximately $458 million.
Subsequent to the end of the quarter, we reduced our cost of debt and increased our liquidity position by issuing $500 million of 6.375% Senior Notes due 2032 and expanding the capacity of our credit facility to $1.0 billion, while extending the maturity date to October 2029. We plan to use a portion of the proceeds from these transactions to redeem our 7.500% Senior Notes on November 7, 2024. Following these transactions, the Company’s next major debt maturity will be in 2028.
Business Outlook and Summary
“Our team remains confident in the strength of our brand portfolio, disciplined operating model, earnings power of the business, and the profitable runway of opportunity that exists in each of our primary end markets,” continued Mr. Nemeth. “We are intensely focusing on elevating the customer experience, invigorating our team’s entrepreneurial spirit, winning additional market share by exceeding customer expectations, and growing the business through accretive acquisitions while strategically allocating capital toward automation and innovation initiatives. Over the last year, the teams at Patrick, in collaboration with our Advanced Product Group, have significantly expanded our product development and prototyping activities as a way to bring next-generation solutions to our customers over the next few years. We are optimistic that a positive demand inflection will occur in 2025, and believe recent interest rate reductions, lower inflation levels and continued solid economic data are important ingredients to bring this recovery to fruition, at which point our business is sized and scaled to pivot in alignment with our customers’ needs. We are deeply appreciative of the incredible commitment and dedication of our team members and energized by their efforts and drive each and every day.”
Conference Call Webcast
Patrick Industries will host an online webcast of its third quarter 2024 earnings conference call that can be accessed on the Company’s website, www.patrickind.com, under “For Investors,” on Thursday, October 31, 2024 at 10:00 a.m. Eastern Time. In addition, a supplemental earnings presentation can be accessed on the Company’s website, www.patrickind.com under “For Investors.”
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