Patrick Industries(PATK) - 2024 Q2 - Quarterly Results

Second Quarter 2024 Financial Results Overview Overview of Patrick Industries' Q2 2024 financial performance, highlighting key achievements and market-specific results Second Quarter 2024 Highlights Patrick Industries achieved significant Q2 2024 financial growth, with double-digit increases in net sales and net income Second Quarter 2024 Key Financial Metrics | Metric | Q2 2024 | Q2 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net Sales | $1.02 billion | $920.7 million | +10% | | Operating Margin | 8.3% | 8.2% | +10 bps | | Net Income | $48 million | $42 million | +13% | | Diluted EPS | $2.16 | $1.94 | +11% | | Adjusted EBITDA | $130 million | $114.4 million | +14% | | Adjusted EBITDA Margin | 12.8% | 12.4% | +40 bps | | Cash Flow from Operations (H1) | $173 million | $178 million | -3% | | Net Leverage Ratio | 2.6x | - | - | | Liquidity | $519 million | - | - | Overall Financial Performance Q2 net sales grew 10% to $1.02 billion, driven by RV and housing markets, with operating and net income also increasing - Net sales increased by 10% to $1.02 billion, a $96 million increase from Q2 2023, primarily driven by revenue growth in the RV and housing markets and the Sportech acquisition, offsetting declines in the marine market[3] - Operating income grew 12% to $85 million, with operating margin improving 10 basis points to 8.3%, attributed to ongoing labor management and revenue growth[3] - Net income increased by 13% to $48 million, and diluted earnings per share rose 11% to $2.16[4] CEO and President Commentary CEO highlighted strategic investments and cost management; President noted acquisitions enhancing resilience and organic growth - CEO Andy Nemeth stated that robust Q2 revenue and operating margin improvements reflect the company's efforts in strategic diversification investments, cost management, and automation initiatives[4] - President Jeff Rodino noted that successful, targeted acquisitions have enhanced business resilience, and the company will continue to pursue acquisition targets with strong management teams, solid risk-adjusted returns, and long-term demand growth potential[4] - The company is driving organic growth by collaborating with customers on innovative, full-component solutions through its Advanced Product Group investment platform[5] Revenue by Market Sector Details Patrick Industries' revenue performance across RV, Marine, Powersports, and Housing markets, highlighting growth drivers RV Market RV market revenue grew 17% to $450 million, accounting for 44% of total, surpassing industry wholesale unit growth RV Market Performance | Metric | Q2 2024 | Q2 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenue | $450 million | - | +17% | | Share of Total Revenue | 44% | - | - | | Wholesale RV Industry Unit Shipments | - | - | +7% | | Content Value Per Wholesale RV Unit (TTM) | $4,966 | - | -2% | | Content Value Per Wholesale RV Unit (QoQ) | $4,966 | - | +2% (vs Q1 2024) | Marine Market Marine market revenue decreased 30% to $158 million, aligning with industry unit shipment declines and dealer destocking Marine Market Performance | Metric | Q2 2024 | Q2 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenue | $158 million | - | -30% | | Share of Total Revenue | 16% | - | - | | Estimated Wholesale Powerboat Industry Unit Shipments | - | - | -27% | | Content Value Per Wholesale Powerboat Unit (TTM) | $3,935 | - | -10% | | Content Value Per Wholesale Powerboat Unit (QoQ) | $3,935 | - | -2% (vs Q1 2024) | Powersports Market Powersports market revenue surged 185% to $104 million, comprising 10% of total, primarily due to the Sportech acquisition Powersports Market Performance | Metric | Q2 2024 | Q2 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenue | $104 million | - | +185% | | Share of Total Revenue | 10% | - | - | | Main Driver | Sportech acquisition | - | - | Housing Market Housing market revenue increased 11% to $305 million, despite total housing starts decline, driven by MH unit shipment growth Housing Market Performance | Metric | Q2 2024 | Q2 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenue | $305 million | - | +11% | | Share of Total Revenue | 30% | - | - | | Estimated Wholesale MH Industry Unit Shipments | - | - | +19% | | Total Housing Starts | - | - | -7% | | Content Value Per Wholesale MH Unit (TTM) | $6,427 | - | +1% | | Content Value Per Wholesale MH Unit (QoQ) | $6,427 | $6,403 (Q1 2024) | Slightly increased | Financial Position, Cash Flow, and Capital Allocation Reviews the company's financial health, including cash flow, capital allocation, and balance sheet liquidity for Q2 2024 Cash Flow from Operations and Investing H1 2024 operating cash flow was $173 million, slightly below prior year, with $17 million invested in Q2 PPE Cash Flow Summary | Metric | H1 2024 | H1 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Cash Flow from Operations | $173 million | $178 million | -3% | | Purchases of Property, Plant, and Equipment (Q2) | $17 million | - | - | | Free Cash Flow (TTM) | $348 million | $444 million | -21.6% | | Long-term Debt Reduction (Q2) | $82 million | - | - | Capital Allocation and Shareholder Returns Company returned $12 million to shareholders via Q2 dividends, maintaining focus on share repurchases with $78 million authorized - Approximately $12 million was returned to shareholders through dividends in Q2[9] - As of the end of Q2, $78 million remained available under the share repurchase authorization[9] Balance Sheet and Liquidity Total debt was $1.33 billion, with net leverage at 2.6x, nearing target, and available liquidity robust at $519 million Balance Sheet and Liquidity Overview | Metric | Q2 2024 End | | :--- | :--- | | Total Debt | $1.33 billion | | Total Net Leverage Ratio | 2.6x | | Available Liquidity | $519 million | - The pro forma net leverage ratio at the time of the Sportech acquisition was approximately 2.9x, which has since decreased to 2.6x[9] Business Outlook and Corporate Information Outlines future business expectations, strategic focus, corporate details, and cautionary statements regarding forward-looking information Business Outlook Company anticipates sustained profitable growth and market share gains upon recovery, enhanced by strategic acquisitions - The company anticipates enhancing performance and profitability through sustained market share growth and strategic acquisitions as end markets recover[10] - The company will maintain an offensive posture, actively evaluating potential acquisition targets, leveraging its net leverage ratio near the target range and $519 million in available liquidity[10] - Management will continue to focus on operational discipline, financial fundamentals, and innovative product development to create long-term value during market volatility[10] Conference Call and Other Matters Patrick Industries will host its Q2 earnings call webcast on August 1, 2024; Matthew S. Filer appointed Chief Accounting Officer - The company will host its Q2 2024 earnings conference call webcast on its website on August 1, 2024, at 10:00 AM ET[11] - Matthew S. Filer was appointed Chief Accounting Officer on May 16, 2024[11] About Patrick Industries, Inc. Patrick Industries is a leading component solutions provider for RV, marine, powersports, and housing markets, with over 85 brands - Patrick Industries is a leading component solutions provider for the RV, marine, powersports, and housing markets[12] - The company offers a comprehensive solutions model encompassing design, manufacturing, distribution, and transportation, with over 85 leading brands[12] - Headquartered in Elkhart, Indiana, the company employs approximately 10,000 skilled team members across the United States[12] Cautionary Statement Regarding Forward-Looking Statements This press release contains forward-looking statements subject to risks and uncertainties, including macroeconomic and market factors - This press release contains forward-looking statements involving various risks and uncertainties that could cause actual results to differ materially from expectations[13] - Potential risk factors include macroeconomic factors (e.g., inflation, interest rate changes), industry cyclicality, supply chain disruptions, deterioration in customer or supplier financial conditions, competitive pressures, governmental and environmental regulations, debt levels, and acquisition integration[13][14] - The company undertakes no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of this release[15] Condensed Consolidated Financial Statements (Unaudited) Presents Patrick Industries' unaudited condensed consolidated financial statements, including income, balance sheets, and cash flows Statements of Income Unaudited condensed consolidated statements of income for Q2 and six months ended June 30, 2024, and July 2, 2023 Condensed Consolidated Statements of Income | ($ in thousands, except per share data) | June 30, 2024 (Q2) | July 2, 2023 (Q2) | June 30, 2024 (6 Months) | July 2, 2023 (6 Months) | | :------------------------------------ | :----------------- | :---------------- | :----------------------- | :---------------------- | | NET SALES | $1,016,624 | $920,685 | $1,950,116 | $1,820,785 | | Cost of goods sold | 785,330 | 710,717 | 1,513,967 | 1,416,573 | | GROSS PROFIT | 231,294 | 209,968 | 436,149 | 404,212 | | Total operating expenses | 146,605 | 134,393 | 292,118 | 272,403 | | OPERATING INCOME | 84,689 | 75,575 | 144,031 | 131,809 | | Interest expense, net | 20,343 | 18,260 | 40,433 | 36,744 | | Income before income taxes | 64,346 | 57,315 | 103,598 | 95,065 | | Income taxes | 16,462 | 14,958 | 20,621 | 22,535 | | NET INCOME | $47,884 | $42,357 | $82,977 | $72,530 | | BASIC EARNINGS PER COMMON SHARE | $2.20 | $1.97 | $3.83 | $3.36 | | DILUTED EARNINGS PER COMMON SHARE | $2.16 | $1.94 | $3.75 | $3.28 | Balance Sheets Unaudited condensed consolidated balance sheets as of June 30, 2024, and December 31, 2023, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets | ($ in thousands) | June 30, 2024 | December 31, 2023 | | :--------------- | :------------ | :---------------- | | ASSETS | | | | Cash and cash equivalents | $43,960 | $11,409 | | Total current assets | 853,894 | 734,631 | | Property, plant and equipment, net | 367,761 | 353,625 | | Goodwill and intangible assets, net | 1,583,634 | 1,288,546 | | TOTAL ASSETS | $3,003,870 | $2,562,448 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total current liabilities | 373,667 | 308,496 | | Long-term debt, less current maturities, net | 1,310,848 | 1,018,356 | | TOTAL LIABILITIES | 1,905,366 | 1,517,111 | | TOTAL SHAREHOLDERS' EQUITY | 1,098,504 | 1,045,337 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $3,003,870 | $2,562,448 | Statements of Cash Flows Unaudited condensed consolidated statements of cash flows for six months ended June 30, 2024, and July 2, 2023 Condensed Consolidated Statements of Cash Flows | ($ in thousands) | Six Months Ended June 30, 2024 | Six Months Ended July 2, 2023 | | :--------------- | :----------------------------- | :---------------------------- | | CASH FLOWS FROM OPERATING ACTIVITIES | | | | Net cash provided by operating activities | $172,658 | $178,351 | | CASH FLOWS FROM INVESTING ACTIVITIES | | | | Purchases of property, plant and equipment | (32,411) | (36,491) | | Business acquisitions and other investing activities | (354,402) | (29,056) | | Net cash used in investing activities | (386,813) | (65,547) | | NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES | 246,706 | (101,740) | | Net increase in cash and cash equivalents | 32,551 | 11,064 | | Cash and cash equivalents at end of period | $43,960 | $33,911 | Supplementary Financial Information (Unaudited) Unaudited supplementary financial information, including EPS calculations and non-GAAP metric reconciliations Earnings Per Common Share Calculation Details calculation and results for basic and diluted EPS for Q2 and six months ended June 30, 2024, and July 2, 2023 Earnings Per Common Share Calculation | ($ in thousands, except per share data) | June 30, 2024 (Q2) | July 2, 2023 (Q2) | June 30, 2024 (6 Months) | July 2, 2023 (6 Months) | | :------------------------------------ | :----------------- | :---------------- | :----------------------- | :---------------------- | | Earnings for basic earnings per common share calculation | $47,884 | $42,357 | $82,977 | $72,530 | | Earnings for diluted earnings per common share calculation | $47,884 | $42,357 | $82,977 | $72,692 | | Weighted average common shares outstanding - basic | 21,724 | 21,521 | 21,689 | 21,556 | | Weighted average common shares outstanding - diluted | 22,169 | 21,787 | 22,125 | 22,151 | | Basic earnings per common share | $2.20 | $1.97 | $3.83 | $3.36 | | Diluted earnings per common share | $2.16 | $1.94 | $3.75 | $3.28 | Non-GAAP Financial Metrics Reconciliation Defines and reconciles Patrick Industries' non-GAAP financial metrics to their most directly comparable GAAP measures Use of Non-GAAP Financial Metrics Company uses various non-GAAP metrics to assess business performance, with detailed calculation methodologies provided - The company uses various non-GAAP financial metrics, including net leverage ratio, unit content, free cash flow, EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, Adjusted Operating Margin, Adjusted EBITDA Margin, and Available Liquidity, to assess business performance[25] - These non-GAAP metrics should not be considered substitutes for GAAP, and their calculation methods may differ from similar metrics used by other companies[25] - Detailed calculation methodologies are provided for Net Debt, EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, Adjusted Operating Margin, and Free Cash Flow[25] EBITDA and Adjusted EBITDA Reconciliation Table reconciling net income to EBITDA and Adjusted EBITDA for Q2 and six months ended June 30, 2024, and July 2, 2023 EBITDA and Adjusted EBITDA Reconciliation | ($ in thousands) | June 30, 2024 (Q2) | July 2, 2023 (Q2) | June 30, 2024 (6 Months) | July 2, 2023 (6 Months) | | :--------------- | :----------------- | :---------------- | :----------------------- | :---------------------- | | Net income | $47,884 | $42,357 | $82,977 | $72,530 | | + Depreciation & amortization | 41,481 | 35,982 | 81,816 | 71,492 | | + Interest expense, net | 20,343 | 18,260 | 40,433 | 36,744 | | + Income taxes | 16,462 | 14,958 | 20,621 | 22,535 | | EBITDA | 126,170 | 111,557 | 225,847 | 203,301 | | + Stock-based compensation | 4,282 | 2,704 | 9,742 | 7,946 | | + Acquisition related transaction costs | — | — | 4,998 | — | | + Acquisition related fair-value inventory step-up | — | — | 822 | 610 | | + (Gain) Loss on sale of property, plant and equipment | (354) | 123 | (368) | 100 | | Adjusted EBITDA | $130,098 | $114,384 | $241,041 | $211,957 | Free Cash Flow Reconciliation Table reconciling cash flow from operations to trailing twelve months free cash flow for periods ended June 30, 2024, and July 2, 2023 Free Cash Flow Reconciliation | ($ in thousands) | Trailing Twelve Months Ended June 30, 2024 | Trailing Twelve Months Ended July 2, 2023 | | :--------------- | :----------------------------------------- | :---------------------------------------- | | Cash flow from operations | $402,979 | $515,793 | | Less: purchases of property, plant and equipment | (54,907) | (71,907) | | Free cash flow | $348,072 | $443,886 | Adjusted Operating Margin Reconciliation Table reconciling operating margin to adjusted operating margin for Q2 and six months ended June 30, 2024, and July 2, 2023 Adjusted Operating Margin Reconciliation | | Second Quarter June 30, 2024 | Ended July 2, 2023 | Six Months June 30, 2024 | Ended July 2, 2023 | | :------------------------------------- | :--------------------------- | :----------------- | :----------------------- | :----------------- | | Operating margin | 8.3 % | 8.2 % | 7.4 % | 7.2 % | | Acquisition related fair-value inventory step-up | — % | — % | — % | 0.1 % | | Transaction costs | — % | — % | 0.3 % | — % | | Adjusted operating margin | 8.3 % | 8.2 % | 7.7 % | 7.3 % | Adjusted Net Income and Adjusted Diluted EPS Reconciliation Table reconciling net income and diluted EPS to adjusted net income and adjusted diluted EPS for Q2 and six months Adjusted Net Income and Adjusted Diluted EPS Reconciliation | ($ in thousands, except per share data) | June 30, 2024 (Q2) | July 2, 2023 (Q2) | June 30, 2024 (6 Months) | July 2, 2023 (6 Months) | | :------------------------------------ | :----------------- | :---------------- | :----------------------- | :---------------------- | | Net income | $47,884 | $42,357 | $82,977 | $72,530 | | + Acquisition related fair-value inventory step-up | — | — | 822 | 610 | | + Transaction costs | — | — | 4,998 | — | | - Tax impact of adjustments | — | — | (1,488) | (122) | | Adjusted net income | $47,884 | $42,357 | $87,309 | $73,018 | | Diluted earnings per common share (per above) | $2.16 | $1.94 | $3.75 | $3.28 | | Transaction costs, net of tax | — | — | 0.17 | — | | Acquisition related fair-value inventory step-up, net of tax | — | — | 0.03 | 0.02 | | Adjusted diluted earnings per common share | $2.16 | $1.94 | $3.95 | $3.30 |