Patrick Industries, Inc. Reports Second Quarter 2022 Financial Results

Patrick Industries, Inc. (“Patrick” or the “Company”), a leading component solutions provider for the Leisure Lifestyle and Housing markets today reported financial results for the second quarter ended June 26, 2022.

Second Quarter 2022 Highlights (compared to Second Quarter 2021 unless otherwise noted)

• Net sales of $1.5 billion increased 45%, reflecting contributions from all end markets and from 2021 and 2022 acquisitions
• Gross profit of $327 million increased 60%
• Gross margin of 22.2% increased 220 basis points
• Operating income of $174 million increased 83%
• Operating margin of 11.8% increased 250 basis points
• Net income of $117 million increased 98%
• Diluted earnings per share of $4.79 increased 90%, and includes a reduction for the impact of the accounting treatment for convertible notes and purchase accounting inventory step-up adjustments totaling $0.52 per share
• Operating cash flows of $97 million increased 242%
• Acquired Diamondback Towers

Net sales in the second quarter of 2022 increased $456 million, or 45%, to $1.5 billion from $1.0 billion in the second quarter of 2021. The increase reflects continued strong performance in our Leisure Lifestyle markets and our Housing end markets, market share gains, and the contribution of acquisitions completed in 2021 and 2022.

Operating income of $174 million increased $79 million, or 83%, from $95 million in the second quarter of 2021. Operating margin of 11.8% in the second quarter of 2022 increased 250 basis points compared to 9.3% in the same period a year ago. The operating margin improvement was driven principally by the realization of productivity improvements and labor efficiencies, increased throughput, leveraging certain fixed costs, the accretive margin profile of recent acquisitions, and returns from investments in human capital and innovation.

Net income increased 98% to $117 million, from $59 million in the second quarter of 2021. Diluted earnings per share of $4.79 increased 90%, compared to $2.52 for the second quarter of 2021. Second quarter 2022 diluted earnings per share includes $0.41 for the accounting treatment of convertible notes discussed below and an $0.11 reduction from purchase accounting inventory step-up adjustments.

In the first quarter of 2022, the Company adopted a new accounting standard that requires its 1.00% convertible notes due 2023 to be presented on an “if converted” basis in the calculation of diluted earnings per share. As a result of the adoption of this standard, the Company’s second quarter 2022 diluted earnings per share was reduced by $0.41. Prior year results do not reflect the adoption of the new accounting standard. The Company does not intend to issue shares in settlement of 1.00% convertible notes due 2023 that may be converted by their holders.

“We are pleased with our second quarter performance as our team continued to work closely with our customers across all end markets to support their production requirements and align with their schedules,” said Andy Nemeth, Chief Executive Officer. “We continued to leverage our investments in technology, automation, and human capital to meet customer needs while maintaining a nimble posture that supports our ability to flex rapidly with changing customer demand. While we have seen subsiding pressures in the supply chain, our team continues to work tirelessly to ensure that we continue to be a priority option as a first-choice scalable solutions provider for our customers while maintaining our capacity and maneuverability.”

Jeff Rodino, President, said, “In May, we welcomed Diamondback Towers into the Patrick family, which represents our continued strategic investment into the marine end market and related aftermarket and further solidifies our presence as the leading provider of ski and wake towers. Additionally, during the quarter, we saw the benefits of our investment of over $100 million in capital expenditures over the last 18 months, as our automation and technology initiatives are helping us leverage our labor resources to allow us to drive continued production efficiencies and strong returns.”

Second Quarter 2022 Revenue by Market Sector (compared to Second Quarter 2021 unless otherwise noted)

RV (57% of Revenue)

• Revenue of $837 million increased 41% while wholesale RV industry unit shipments remained relatively flat
• Content per wholesale RV unit (on a trailing twelve-month basis) increased 34% to $4,754

Marine (20% of Revenue)

• Revenue of $290 million increased 74% while estimated wholesale powerboat industry unit shipments increased 10%
• Estimated content per wholesale powerboat unit (on a trailing twelve-month basis) increased 66% to $4,699

Manufactured Housing (“MH”) (13% of Revenue)

• Revenue of $200 million increased 44% while estimated wholesale MH industry unit shipments increased 14%
• Estimated content per wholesale MH unit (on a trailing twelve-month basis) increased 22% to $5,851

Industrial (10% of Revenue)

• Revenue of $148 million increased 24% while housing starts increased 3%

Balance Sheet, Cash Flow and Capital Allocation

Cash provided by operations for the second quarter of 2022 of $97 million increased 242% compared to $28 million in the second quarter of 2021, reflecting improved performance in all four end markets, partially offset by continued investment in working capital as we partnered with our customers to ensure that we met their requirements. Cash used in business acquisitions in the second quarter of 2022 totaled $19 million, primarily related to our acquisition of Diamondback Towers. Capital expenditures in the second quarter of 2022 totaled $26 million, compared to $12 million in the second quarter of 2021, reflecting continued investments in infrastructure and automation initiatives to better align resources for increased scalability and to support customer growth.

In alignment with our capital allocation strategy, we returned $24 million to shareholders in the second quarter of 2022, including $17 million through opportunistic repurchases of approximately 288,600 shares and $7 million of dividends.

Our total debt at the end of the quarter was approximately $1.5 billion, resulting in a total net leverage ratio of 1.9x (as calculated in accordance with our credit agreement). Available liquidity, comprised of borrowing availability under our credit facility and cash on hand, was approximately $346 million.

Business Outlook and Summary

“Late in the second quarter we began to see a meaningful reduction in RV OEM wholesale unit production, signaling the start of a calibration of wholesale and retail RV unit shipments, which we believe reflects thoughtful discipline,” continued Mr. Nemeth. “Our other markets, which represent 43% of our business, appear to have runway for continued strong results, supported by continued lean marine, MH, and housing inventories. We believe Patrick’s diversified end markets, combined with our flexible and nimble operating model and highly variable cost structure, well position us to navigate through an uncertain macroeconomic environment. Additionally, our diligent focus on innovation, investments in infrastructure, and our disciplined capital allocation strategy are expected to continue to support our goal of delivering long-term value for our shareholders, team members, partners, and communities.”

For the full second quarter results, click here.

About Patrick Industries, Inc.

Patrick Industries (NASDAQ: PATK) is a leading component solutions provider for the RV, marine, manufactured housing and various industrial markets – including single and multi-family housing, hospitality, institutional and commercial markets. Founded in 1959, Patrick is based in Elkhart, Indiana, with over 12,000 employees across the United States.

Contact:

Julie Ann Kotowski – Investor Relations – kotowskj@patrickind.com – (574) 294-7511

Source: Patrick Industries, Inc.