Patrick Industries, Inc.

Good morning, ladies and gentlemen, and welcome to the Patrick Industries Incorporated First Quarter 2021 Earnings Conference Call. My name is Diego, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. And I will now turn the call over to Ms. Julianne Katowski from Investor Relations. Ms. Katowski, you may begin.

Good morning, everyone, and welcome to Patrick Industries' first quarter 2021 conference call. I am joined on the call today by Andy Nemeth, President and CEO, and Jake Pekovic, CFO. Certain statements made in today's conference call regarding Patrick Industries and its operations may be considered forward-looking statements under the securities laws. There are a number of factors, many of which are beyond the company's control, which could cause the actual results and events to differ materially from those described in the forward-looking statements. These factors are identified in our press releases, our Form 10-K for the year ended 2020, and in our other filings with the Securities and Exchange Commission. We undertake no obligation to update these statements to reflect circumstances or events that occur after the date before looking statements are made. I would now like to turn the call over to Andy Nemeth.

Thank you, Julianne. Good morning, ladies and gentlemen, and thank you for joining us on the call today. We kicked off our first quarter of 2021 with the continuation of the strong trends and tailwinds supporting our markets as expected. In fact, momentum accelerated both year over year and sequentially in our leisure lifestyle markets, which represents 75% of our first quarter revenues as the strength of both retail and wholesale shipments in the recreational vehicle and boating markets materially improved year over year. Demand for outdoor recreation remains solid in interest and popularity in alignment with our view of their tremendous attractiveness and potential in both the COVID and post-COVID environment. Energy remains strong, capitalizing on interest in outdoor recreation activities that provide adventure in the exploration of the great American outdoors the ability for families to experience this adventure together, and the inherent social distancing through the freedom of being outside. In our housing and industrial markets, which collectively represent approximately 25% of first quarter revenues, housing, repair and remodel, and home improvement conditions also remain robust, with demand for housing continuing to outweigh supply, the success of the evolving work-from-home model, and the continued urban migration and exodus from certain concentrated regions to less dense and more attractive climate-associated regions. These trends in leisure lifestyle and housing and industrial consumer preferences and activities all provide strong tailwinds for Patrick and our primary end markets, further solidifying an already promising long-term outlook. From an operations perspective, the size, scale, and flexibility of our well-positioned operating and financial platform allowed us to execute strategically and tactically during the quarter and leverage our fixed cost structure to drive increased profitability. Our fourth quarter decision to carry heavier inventories in anticipation of a strong start to the year proved positive, as those inventories were quickly used up in Q1. Our tremendously talented team members and business unit leaders leveraged our internal sourcing synergies, purchasing power, and supply chain partnerships and relationships, proactively overcoming material pricing and supply chain challenges and constraints to support our customers where others couldn't. We further deployed capital within our infrastructure to proactively drive our business model off of, as well as automating and expanding capacity, which will continue to allow us the opportunity to consistently deliver our differentiated products and services to our customers. We continued our investments in innovation, automation, capacity, and our facilities in anticipation of resilient demand and channel restocking for the foreseeable future to, again, match up and flex with our customers' growth expectations and demands. We completed the acquisition of CDOG in the first quarter and also focused efforts on investments in our human capital initiatives. We are actively investing in the tools needed, talent, and energy of our people who work for our customers, both internal and external, to more proactively provide them with access to the solutions and products that will help further drive our performance in end markets. The spirit of our team members, in combination with their dedication and can-do attitude, has led us forward as we partner with our customers in the development and delivery of products promoting and enabling excitement, growth, and enthusiasm toward our end markets. On the COVID-19 front, the passion and compassion of our team members has been inspiring. Our trends continue to improve and our protocols remain in place and active. We will continue to prioritize the health, safety, and well-being of our team members in alignment with our core values and culture. Our ESG and related initiatives continue to be a high priority for us as well as we continue on our journey to drive focus, goals, and vision on sustainability across our platform and the way we use resources through innovative programs to reduce waste and reuse materials. Additionally, we are dedicated to solid corporate governance and accountability to our stakeholders and human capital management initiatives to provide a safe, inclusive, and tolerant environment in which everyone is encouraged, empowered, and supported in the pursuit of their professional and personal development goals. With that as a general update and backdrop, our first quarter operating performance was very strong in alignment with high double-digit revenue growth in our RV, marine, and industrial end markets, and high single-digit revenue growth in our MH market. Our teams worked tirelessly to match up with OEM and builder production levels as we once again leveraged our fixed cost structure to drive improved gross profit, operating income, net income, and diluted earnings per share during the quarter. Our first quarter revenues of $850 million increased 44% or $261 million compared to the first quarter of 2020, and we earned $2.04 per diluted share, a 124% increase over the prior year's first quarter. Subsequent to quarter end, we completed the acquisition of CDEP, the industry-leading marine supplier of non-slip foam flooring, and also closed on new financing with the issuance of $350 million of senior unsecured notes in conjunction with the expanded capacity and extension of our credit facility, which Jake will further detail. We will continue to proactively position our capital structure for both strategic and defensive purposes to remain flexible and nimble in any environment and support our growth needs and capital allocation strategy in alignment with our overall strategic plan. Now turning to a deeper dive in our end markets. Just as calibration of inventories and destocking has occurred in our leisure lifestyle markets in the past, The same holds true currently on the restocking front, as RV and marine dealer inventories, whether new or used, continue to trend at or near historical lows as measured by weeks on hand, and RV and marine retail sales continue to be powered by healthy and growing demographic trends. New buyers, motivated by the outdoor recreation boom, continue to enter the space, and by doing so, also introduce the boating and camping lifestyle to their friends and family, likely promoting a chain reaction. Housing demand as well, supported by similar demographic trends, low interest rates, government stimulus as a result of COVID, and a shift in migration trends from urban areas to suburban are expected to further bolster our MH and industrial market businesses in single and multifamily housing, home improvement, and repair and remodel. Our RV revenues were up 181 million, or 57% in the first quarter, and represented 59% of our consolidated sales. RV wholesale unit shipments were up 48%, totaling more than 148,000 units for the quarter. We currently estimate retail unit shipments also increased between 30% and 35% in that same period, or resulted in between approximately 115,000 and 125,000 units sold. Units are continuing to immediately retail sell through at the dealer level, and backlogs at the OEMs continue to increase, further delaying the dealer inventory replenishment cycle. And as we head into the peak retail buying season in Q2 and Q3, our estimates indicate that dealer inventories are down approximately 30% to 35% on TTM retail unit shipments that are up 20% over the same period. Household owning RVs has continued to grow over the years with approximately 11.2 million U.S. households currently owning an RV, with an additional projected 9-plus million households intending to own an RV in the next five years. according to the most recent 2020 RV owner demographic profile. Additionally, 68% of current owners plan to purchase another RV in the next five years, according to the same survey. Camping and boating opportunities continue to grow, bolstered by continued public and private investment in the outdoor infrastructure. Outdoor recreation is a natural form of social distancing and the opportunities to explore are everywhere, with national parks and the incredible national American footprint. The RV market continues to additionally benefit from upgrades by existing users, along with recent work and study from anywhere trends. The continued strong traffic of the dealers, widespread awareness of the RV lifestyle, and OEM and dealer commitments to offering a strong value proposition will all provide greater opportunities and capacity for Americans to experience camping opportunities outdoors. On the marine side of our business, momentum is just as strong and continues based on similar trends that parallel RV wholesale, retail, and dealer demand and inventory levels, with marine inventory levels even leaner than RV and a longer potential runway for extended restocking. Our marine revenues of $137 million, representing 16% of our sales, were up $59 million, or 75% for the quarter, on estimated marine wholesale unit shipments that increased approximately 12% to 15% in the same period. Marine retail shipments are estimated to have increased approximately 30% to 35% in the quarter, translating into between 45,000 and 50,000 units sold. New buyers continue to enter the marine space and expand the ongoing network effect, and demographic trends are driven primarily by a sweet spot of the 35 to 45-year-olds at their peak wealth and family formations. Secular trends also advanced in outdoor recreation, and in particular, an interest in boating activities from across the spectrum of boat types, whether it's fiberglass, pontoon, ski and wake, or fishing. Marinas are at peak capacity, and heavy boat usage patterns and resulting demand for new marine products, including aftermarket products, where our presence continues to grow, have created historically low channel inventories. Our estimates indicate that dealer inventories are down more than 45% to 50%, on TTM retail shipments that are up approximately 15% to 20% over the same period. We expect a very positive demand trajectory for marine wholesale unit shipments and favorable supply and demand conditions throughout the remainder of 2021. In summary, the leisure lifestyle markets are well positioned to support long-term growth and are expected to continue to benefit from tailwinds, including historically low inventories, low interest rates, an extremely compelling outdoor recreation value proposition, strong demographic trends, and expansion of the customer base, among others. We believe that the leisure lifestyle markets are poised for continued strength throughout the remainder of 2021 and well into 2022. Now turning to the housing and industrial side of our business. New single family housing starts increased 20% in the quarter, and while multifamily housing starts decreased during the quarter, March showed a significant revival and was up 33% as conditions are improving from COVID-19 related constraints. Demand for new housing starts continue to outpace supply, and combined with activity in home improvement projects and related do-it-yourself activities, the housing sector indicates a positive demand trajectory for the remainder of 2021. Tightness in the housing market and relative affordability of manufactured housing present two strong positive data points for our housing and industrial markets. Urban, suburban, and rural migration demographic trends representing household wealth formation And the continued increase of both builder and MH OEM backlogs indicate supply demand trends that we believe will lead to continued growth in our industrial and MHN markets for the remainder of 2021. Our manufactured housing sales of $121 million represented 14% of our total revenues in the quarter, increasing 8% over the first quarter of 2020, on an estimated decrease in MH wholesale unit shipments of 2%. OEMs continue to work through capacity constraints with increasing backlogs. As capacity opens up and backlogs translate into MH wholesale unit shipments for the remainder of 2021, we believe there is positive trajectory for MH production and resulting demand for our supply to this market in the remainder of 2021. Revenues in our industrial market sector were $92 million, or 11% of our overall sales mix in the first quarter, increasing 16% compared to the prior year. New housing starts increased 10% in the first quarter. Continued growth in new residential construction, the R&R market, and big box home improvement are supported by similar tailwinds as in our other markets and are showing no signs of slowing down. In summary, we are continuing to deploy our resources in tandem with our customers' growth trajectory to foster further opportunities to partner and gain share in alignment with the secular movement in all four of our primary markets. Inventory depth, attention to consumer market interest, Our capabilities of actively managing our supply chain and our disciplined capital allocation and financing strategies have positioned our business for continued growth through the remainder of 2021. We are investing in software, automation, and specialized equipment needs, which will enable our team members to have better balance and serve our customers at the highest level. I'll now turn the call over to Jake, who will provide additional comments on our financial performance. Thanks, Andy, and good morning, everyone.