Patrick Industries, Inc.

Good morning, ladies and gentlemen, and welcome to Patrick Industry's second quarter 2021 earnings conference call. My name is Daryl, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. The 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 our call this morning. I am joined on the call today by Andy Nemeth, CEO, Jeff Rodino, President, 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 the forward-looking statements are made. I would now like to turn the call over to Andy Nemitz.

Thank you, Julianne. Good morning, ladies and gentlemen, and thank you for joining us on the call today. I would especially like to welcome Jeff Rodino, who in his new role as president continues his legacy of leadership and deep knowledge of our business and end markets. We're absolutely thrilled that Jeff has taken on this new role, offering his phenomenal experience and insight into our products, customers, and people, and I am very excited to continue to work with him as he brings his energy, wisdom, and vision to our businesses and team. Our second quarter of 2021 reflects continued quarter-over-quarter and sequential strong top-line growth and profitability, as well as the exciting expansion of our footprint and capabilities in the leisure lifestyle markets. This has been the trend over the last three quarters as we emerge from the uncertainty of COVID. It has become clear that outdoor recreation and housing needs will be front and center in the way family and friends spend quality time together. Additionally, as consumers continue to invest in the security of homeownership, the functionality and value of home improvement remains strong. A year has passed since we felt the full early-stage impact of COVID in the second quarter of 2020, but we diligently exercised the flexibility of our business model, reinforcing our resilience. We were able to drive profitability despite a six-week shutdown of our plants in line with the OEMs and paused on our CapEx and acquisition initiatives. Emerging from the second quarter of 2020, we quickly shifted gears from defensive to offensive, immediately began reinvesting in our business to supply the explosive growth in not only leisure lifestyle but housing as well fast forward to q2 2021 and we are operating in a very dynamic and exciting marketplace fueled by the incredible and growing horsepower of what now approximates more than 10 000 team members who are providing rv marine mh and industrial solutions to our customers supply chain volatility and initiatives in the quarter required our teams to remain flexible get creative collaborate and work together between brands, and reach out to our deep network of partners to secure essential materials needed to deliver on growth in our primary end markets. We have continued to partner with the OEMs and builders in all of our markets as well, as they have demonstrated tremendous flexibility in adapting their business model and build schedules to match up with the supply chain constraints and opportunities. The leisure lifestyle markets represented 74% of our revenue in the quarter, and consumer demand has remained strong throughout the spring and summer, The evidence is everywhere, with national parks seeing record visits and marinas continuing to be at full capacity as the adventure continues for friends and family to share experiences while being right at the center of nature and the outdoors with the luxury of having home-based amenities. In our housing and industrial markets, which together represent approximately 26% of second quarter revenues, housing, repair and remodel, and home improvement demand remain a consistent trend as a very tight housing market is supporting homeownership and investment in home improvement. These trends in consumer preferences and activities all provide continued support for our primary end markets and our long-term outlook. Operationally, the growing magnitude of our footprint and the agility of our position in our markets translated into strategic gains in the quarter, as we continued leveraging our fixed cost structure and automation efficiencies, as well as driving continuous improvement initiatives, which further propelled profitability. The incredible talent, dedication, commitment, and knowledge base of our team members and business unit leaders amplified our efforts, in addition to our internal sourcing synergies, purchasing power, and supply chain relationships, resulting in a difficult but successful navigation of the current supply chain environment. Our team members are continuing to demonstrate their passion for our products and customers, as evidenced by their can-do attitudes, tremendous resilience, and willingness and desire to go the extra mile to match up with customer production schedules. Capital deployment and strategic investment in our infrastructure continues to drive our business in alignment with our disciplined capital allocation strategy. CapEx and software initiatives are and have been focused on automation and capacity expansion to continue to provide our differentiated solutions to our customers' dynamic demand patterns. We've also reinvested in the business to leverage our foundation to proactively take advantage of the strategic opportunities in front of us. We've added talent and resources to support our ESG initiative which continue to be a high priority as we apply our company's vision and ambition to our sustainability journey. Innovative material use minimization and optimization programs continue across our business operations to reduce waste, reuse materials, and recycle. Human capital management programs, including leadership development, training, continuing education, and cultural alignment, develop our people and enhance their well-being at work and at home to help foster and retain both our legacy and new talent. As we have discussed, it is unquestionably the talent and mindsets of our people that provide the solutions and creative energy for our customers. Our second quarter operating performance exhibited particularly strong year-over-year and sequential quarter-over-quarter growth, given the comparison to the Q2 2020 backdrop of COVID-related production shutdowns. In comparison to Q2 2020, we saw triple-digit growth in our RV and marine end markets and high double-digit growth in our MH and industrial end markets. Market strength, our team's operating model, and the leveraging of our fixed cost structure translated into improved gross and operating profit margins, operating income, net income, and diluted earnings per share during the quarter. Our second quarter revenues of over $1 billion increased 141%, or $596 million, compared to the second quarter of 2020, and we earned $2.52 per diluted share. I'll now turn the call over to Jeff Rodino, who will provide further details into our end markets.

Thanks, Andy, and good morning, everyone. Our RV revenues were up 391 million, or 192%, in the second quarter and represented 58% of our consolidated sales. RV wholesale shipments were up 101%, totaling approximately 152,000 units for the quarter. We currently estimate retail unit shipments also increased between 30% and 35% in the same period or resulted in between 190,000 and 200,000 units sold. Dealers continue to quickly turn units to retail customers as restocking has not yet started, and OEM backlogs continue to rise, indicating a further extension of dealer inventory replenishment cycle. Our estimates indicate that dealer inventories are down year-over-year approximately 35 to 40 percent on TTM retail unit shipments that are up 35 to 40 percent over the same period. Restocking of RV and marine retail inventories continues to be delayed, as retail sales continue to outpace OEM production. New and used inventory levels continue to deplete, achieving historic lows as registered by weeks of inventory on hand. RV and marine retail sales continue to be driven by healthy and growing demographic trends, as well as heightened interest in the leisure lifestyle space. The motivation of the new market participants for outdoor recreation continues as they discover the benefits of RV camping and boating. activities. The additional network effect of popularity and familiarity in the leisure lifestyle space fosters a platform of demand and growth. Investment in RV camping and boating infrastructure, which includes the growing rental and booth docking space, is driven by growing public and private capital investment. The ease of social distancing outdoors is spurring great interest in our national parks, private lands, and a variety of iconic coastal and inland opportunities across the country. Aftermarket activities driven by RV and marine market upgrades continues to be driven by existing users, and work and study from anywhere trends remain strong as hybrid work environments have become the new normal. Strong dealer traffic, growing popularity of what the RV lifestyle offers in a variety of environments, And OEM investments in the differentiated products and dealer investment in education and product service continue to foster a compelling value proposition that provides growing opportunities. On the marine side, momentum cues off the similar recreation trends. The delta between wholesale and retail shipments indicates a continued depletion of powerboat inventory on the dealer lots and resulting similar extension of the restocking cycle. Our marine revenues of $167 million representing 16% of our sales and increasing as a percentage of our mix due to our organic and strategic efforts were up $107 million or 182% for the quarter on estimated marine wholesale shipments that increased approximately 25% to 30% in the same period. We estimate that the marine retail shipments were roughly flat in the quarter constrained by low dealer inventories. translating into between 87 and 92,000 units sold. New boat owners are further driving a network effect and are fostering interest in the key demographic demand hubs as wealth and family formation reach their peak levels. Outdoor recreation trends in fiberglass, pontoon, ski and wake, and fishing continue to be fueled by a desire to be on the water. Our estimates indicate that the marine dealer inventories are down more than 60% on TTM retail shipments that are up approximately 17% to 22% over the same period. Demand trajectory continues in tailwind fashion for marine wholesale unit shipments, and virtually all parties in the marine ecosystem are focused on ideal supply and demand dynamics for the back half of 2021 and beyond. Our leisure lifestyle markets are ideally positioned to support sustained growth and are expected to continue to benefit from tailwinds of lean inventories, an attractive interest rate environment, an extremely compelling outdoor recreation value proposition, strong demographic trends, and the expansion of the customer base. Retail demand has not subsided, and we believe the leisure lifestyle markets are poised for continued strength throughout the back half of 2021 through 2022 and likely into 2023 based on our estimates and current market conditions. Now turning to the housing and industrial side of our business. New single family housing starts increased 42% in the quarter and multifamily housing starts increased 48%. Demand for building supplies remains firm, driven not only by single and multifamily builds, but also by home improvement projects and related do-it-yourself activities, indicating continued positive demand trajectory for the back half of 2021. Housing demands supported by wealth formation and demographic trends, low interest rates, and household formation patterns that support continued migration from urban to suburban areas lend increasing support to our MH and industrial market businesses in single-family and multi-family housing, home improvement, and the repair and remodel market. Tightness in the housing market and related affordability of manufactured housing represents strong dynamic for our housing and industrial markets. Urban, suburban, and rural migration, changes in housing spending patterns, and the continued increase of both builder and MH OEM backlogs indicate supply demand trends that we believe will continue growth in our industrial and MHN markets for the back half of 2021 and through 2022. Our manufactured housing sales of 139 million represented 14% of our total revenues in the quarter, increasing 54% over the second quarter of 2020 on an estimated increase in MH wholesale shipments of 30%. OEM started to unlock healthy backlogs in the quarter and made progress in the resolution of capacity constraints that had previously impacted and constrained production rates and schedules. We see a positive trajectory for MH production and resulting demand for our supply to this market for the back half of 2021. Revenues in our industrial market sector were $119 million, or 12% of our overall sales in the second quarter, increasing 69% compared to the prior year. New housing starts increased 43% in the second quarter. Our allocation of resources aligns with the trajectory of our customer growth as we support secular trends in our four primary end markets. Inventory depth, attention to our consumer market interest, Our capabilities and multifaceted efforts to actively managing our supply chain and our disciplined capital allocation and financial strategies have positioned our business for continued growth through the remainder of 2021. As Andy noted, 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 levels. I'll now turn the call over to Jake, who will provide additional comments on our financial performance.

Thanks, Jeff, and good morning, everyone. Our consolidated net sales for the second quarter increased 141% to $1.02 billion, driven by increases in all four primary end markets. While the increase reflects the impact of six weeks of shutdowns for many of our plants in the second quarter of 2020, the growth in consolidated net sales for this quarter demonstrates the strength of our business model and our ability to support our customers. Revenue from our leisure lifestyle markets, which are comprised of RV and marine, increased 190% with RV and marine revenues up 192% and 182% respectively. RV content per unit increased 15% to $3,543 per unit and estimated marine content per unit increased approximately 60% to $2,841 per unit. Revenues from our housing and industrial markets increased 60% in the quarter with MH revenues up 54% versus the prior year and industrial revenues up 69% compared to the prior year. Estimated MH content per unit increased 7% to $4,806 per unit. Gross margin in the second quarter was 20%, increasing 260 basis points compared to the prior year. The gross margin improvement was primarily driven by benefits of strong operating execution and leveraging our fixed cost, realization of production efficiencies, and overall continued investment in innovation and delivery of our products. These gains were partially offset by labor cost pressures, which persist in the majority of our operating spaces. Operating expenses were 10.7% of sales compared to 14.5% in 2020, which reflect the realization of capital investment efficiencies and related fixed cost leverages noted during sales growth expansion of all of our primary end markets. Warehouse and delivery expenses decreased 140 basis points as we maximize the efficiencies of our transportation and warehousing capabilities during a period of robust demand for our products. SG&A expenses were 5.9% of sales in the quarter, a 150 basis point decrease compared to the prior year, again, primarily reflecting the management of our expense base alongside efficiencies driven by investment in processes and people. Operating income of $95.3 million increased 688% in the second quarter, and operating margin of 9.3% increased 640 basis points, primarily due to the strong execution in the quarter in comparison to the impact of COVID in the second quarter of 2020. Our diluted earnings per share in the second quarter was $2.52, up from $0.03 in the prior year. Our overall effective tax rate decreased to 26.9% for the second quarter of 2021, compared to 44.4% in the prior year. The second quarter of 2020 reflects the relative impact of changes in taxes against the modest net income generated during Q2 2020 shutdowns. We expect our overall effective tax rate for the full year 2021 to be between approximately 24% and 25%. Looking at cash flows, we generated approximately $28.4 million of operating cash flows for the second quarter of 2021 compared to $26.2 million for the prior year quarter. Our operating cash flows were impacted by the timing of our fiscal quarter as we collected approximately $26 million in receivables within two days after the quarter end. The second quarter of 2020 demonstrated our ability to monetize working capital during a short-term curtailment in activity during COVID disruptions, and Q2 2021 reflected the use of our strong liquidity position to finance working capital commitments and aggressively do our best to support the supply of inventory to OEM producers. This was in support of production commitments during a competitive and dynamic supply chain landscape. As we proactively secured and managed inventory in the second quarter of 2021 to maintain production schedules for our OEM customers, we invested in networking capital and, therefore, our cash conversion cycle expanded to accommodate demand and ensure that we strategically put ourselves in the best position possible to meet our customers' production schedules. We believe this dynamic pivot to intervene in an aggressive supply chain environment will play out in operating cash flow expansion in future periods as the supply chain normalizes. In alignment with our discipline capital allocation strategy, we invested $12 million in capital expenditures for the quarter to support capacity expansion and automation to support the growing end market demand. Additionally, we deployed $239 million in acquisition capital in the second quarter of 2021. In April, we completed the acquisition of CDEC, welcoming their industry-leading proprietary non-slip flooring to the marine OEM and aftermarkets to the Patrick family of leading brands. In the same month, we acquired Alpha Systems, whose world-class production facilities provide proprietary roofing, adhesive, and sealant products to the RV, OEM, and aftermarket channels. Both acquisitions further enhance our scale, increase the diversity of our products and solutions, grow our aftermarket presence, and expand the depth of our penetration into leisure lifestyle markets. In second quarter, in accordance with our dividend policy, We returned nearly $7 million to shareholders in the form of quarterly dividends, and we further deployed $22 million in the form of opportunistic share repurchases. In April, in support of our strategic growth plan and in alignment with our financing strategy, we issued $350 million of 4.75% senior notes due 2029. Contemporaneously with the issuance of these new notes, we extend the maturity of our credit facility to April 2026, enhance the flexibility of our credit agreement, and increase the aggregate credit facility size to $700 million. At the end of the second quarter, we had approximately $468 million of total liquidity comprised of $58 million of cash on hand, unused capacity on our revolving credit facility of $410 million, and a total net leverage ratio of 2.3 times. Our comfortable leverage and strong liquidity position us well to continue to execute on our strategic growth initiatives, as well as continue our unyielding support of our customers' needs. For 2021, RVIA currently estimates an approximate 34% increase in wholesale unit shipments to 576,000 units with an upside range of 586,000 units, and our current estimate points towards the higher ends of that range. Based on current market conditions and trends, we are presently estimating RV retail to be up low double digits for the full year. We currently anticipate marine wholesale to be at 25% to 30% over the 2020 shipment rates on retail that is estimated to be up low single digits and only constrained at this point by inventory levels. Based on these estimates and the continued strong retail demand expectations, we believe channel inventories in both the RV and marine markets will remain well below recent historic levels and will not be calibrated to a new normal until likely late into 2022 and 2023. In the manufactured housing and industrial markets, we currently expect MH wholesale unit shipments to increase low to mid double digits in 2021 and new housing starts to continue their strong trajectory of double digit growth in 2021. We have continued to invest in our capabilities to strive to ensure that we can meet increasing OEM demand as the markets grow at a rapid pace. Geographic diversification and scale will further enable us to support and capture the growth of our addressable end markets. Our strong cash flow and liquidity support investments in our end market platforms. We estimate approximately $300 million of operating cash flow and $50 to $55 million of capital expenditures for the full year 2021. which reflects increased investment in automation projects to offset the expected continued tight labor market and long-term demand expectations, enabling us to continue to support and drive organic growth across all of our end markets. That completes my remarks. Andy? Thanks, Jake. While supply chain constraints play out due to an expanding global economy, strong consumer balance sheets, and manufacturing capacities coming online, the growing sophistication of our deep bench of talent across our platform has driven an even more compelling collaborative effort with our OEM customers. At the same time, our interaction with the robust trends of the leisure lifestyle aftermarket have led to growing promising capture of opportunities. The quarter was as dynamic as we have seen, and the talent and dedication of our people illustrated our ability to strive to provide the best service and products to our customers. Our organization, team, and brands are clearly better together, especially during volatile times. and our opportunities for both organic and strategic growth and harmonies are significant. Our proactive investment in our infrastructure, teams, innovation, and culture continues to be a bright spot, coupled with our technology investments and intelligent expansion of strategic IT and software initiatives. We believe these initiatives will improve our organic capacity and provide us with the opportunity to better partner with our customers and enhance their growth in both leisure lifestyle and housing markets. The well-being of our nearly 10,000 team members will remain a core focus. Their dedication and outstanding execution during this quarter complement our investments and their success and will drive our efforts to unlock fragmented markets, innovate, and deliver quality products and reliable service to our customers. This is the end of our prepared remarks. We are now ready to take questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first question has come from the line of Brett Andress with KeyBank Capital Markets. Please proceed with your questions.

Hey, good morning, guys. So, Andy, looking at RV wholesale shipments each month, we've kind of plateaued around this 50,000 unit a month pace. I just want to get your thoughts on, you know, when or if you think the industry can kind of start to break out of that range or if these constraints are kind of with us for the foreseeable future, which I guess I don't think is necessarily a bad thing.

Sure, Brett. What we would tell you is I think that we're going to see some supply chain constraints for the next quarter or two as the kind of global economy picks back up and continues to grow. We're definitely seeing robust demand out there on the retail side and the wholesale side. And what we would tell you is at 50,000 units a month, we think that's a We think that's a very compelling, you know, run rate today and it keeps everything in balance from our perspective. So I think the other thing that we're hearing really across the platform, especially in leisure lifestyle, is that, you know, the OEs are looking to be able to increase capacity, you know, as we go forward. So as the supply chain eases up a little bit, our anticipation would be is that we'll be able to match up with increased production rates going forward. But I do see it for the next quarter or two, but again, I don't think it's a bad thing today. It's stressful, certainly, but one of the things that's come out of it is a tremendous collaborative relationship between ourselves and our OEM partners. We're mixing and matching together to really be able to maximize opportunities as it relates to production schedules today. I don't think 50,000 units a month is bad, and I think there's opportunity for improvement in the future, but overall, we feel good about where we're at today. We're going to continue to work hard to mitigate the supply chain constraints. It's really everywhere, everywhere we look. And so, again, I think we're doing – our teams have done a phenomenal job of matching up, and we look for that to continue.

Yeah, understood. And sorry if I missed this earlier, but did you give any update on how you're thinking about the 80 to 100 basis points of operating margin improvements you laid out on the last call? Don't know if there's any moving pieces in the back half of the year. And then also, I think you gave an operating cash flow guide, but how much working capital do you think you need to build in the back half from here?

Hey, Brett, it's Jake. I appreciate the questions. When we think about our operating margin, your first question, we're thinking about continued evolution of that view. And I would tell you that when we started the year at 80 to 100, we're now thinking that's more of 100 to 120, 130 basis points of expansion on a year-over-year basis. We're certainly seeing a lot, as Andy mentioned and I did as well in the prior remarks. We're seeing the leverage of our fixed costs. We have great absorption on those, of course, as you'd expect. We're also seeing a lot of great benefits coming from our cost initiatives, our ability to manage our labor force, and as well as the automation of our CapEx investments that we've made in the business, which are really starting to show through in a very positive way in our margin line. When we think about the investment inventory, I would tell you that You probably recall that at the beginning of this year, we spoke about a proactive inventory grow in fourth quarter to make sure we were on our front foot as we came into what we expected to be some significant demand in first quarter, and that certainly has played out very well. I'll tell you, when I look at our working capital, I think about us being kind of up on plane for that $50,000 a month that you were speaking to and how that works for our business. As we continue to grow, there will be continued investments in inventory, and as Andy mentioned, with a little bit of supply chain comes a little bit of investment in that increased cost in some of that inventory. But I would tell you we're in a pretty good spot from a continuity perspective where our balance sheet looks at the current production levels, which we expect to see and persist through the rest of this year.

Great. Thank you, guys.

Thank you. Thank you. Our next question has come from the line of Daniel Moore with CJS Securities. Please proceed with your questions.

Good morning, Andy and Jake, and congrats, Jeff, and thanks for taking questions.

Good morning. Good morning.

Maybe just start with top line. Can you give a sense of the revenue contribution from businesses acquired over the past 12 months as well as what the impact of pricing of, you know, passing through of higher raw materials is? you know, any sense of what each of those, how those impacted Q2?

It's Jake again, and thanks again for dialing in today. Well, as you can see, we're up 140% on a year-over-year basis, and so think about the breakdown in the composition of that number. I'll tell you about the first 20% of that is due to acquisitions we've made in the interim period, and they are certainly showing up in that number. The rest of, I call you, the first 120% percent of that growth is pretty evenly split between industry growth, which we certainly participate in, and the other half of that is coming from our growth of organic initiatives, taking share, and all the other things that we do really well. When we think about the pricing impact to that, it sits somewhere inside that organic. I could tell you it's somewhere in that about 20 percent of that half of the first 120 percent. which certainly contributes to our growth as something we're able to pass through pretty effectively, as we've talked about in previous calls, and we've certainly seen an inflationary environment, and I think that extends through the entire supply chain. But somehow it's something we rely on. We really rely on our execution, our ability to take that share and continue our organic growth and deliver on these numbers.

So, sorry, 20% of that half, which is organic, is that the right way to think about it for pricing?

I'd say 2,000 basis points is how I would think about that.

Got it. Got it. Yep. That makes sense perfectly.

Right.

And just following up on Brett's question, you know, the operating margins above 9%, gross margins above 20%, really impressive, particularly given some of that raw material inflation. Even at 120, 130 basis points up year-over-year for the full year, it would still imply lower margins kind of year-over-year in the back half. So just wondering if there's conservatism as we think about the back half of the year or maybe something else going on, just trying to pull on that string and how we think about margins both sequentially and year-over-year for the back half of the year. Thanks.

Thanks, Dan. It's Jake again. You know, we think about the margins as we continue to trend through this year is that consistency of the execution that we've been able to perform in a pretty dynamic supply chain environment, as well as, you know, the labor, the work for labor, particularly here in northwest Indiana, as well as around the country, as you can see, its headline news continues to this day and our ability to keep our hands firmly around the rudder on that kind of work. I would tell you that We continue to invest in our business and use those opportunities to drive incremental margin as we drive efficiencies and use that to manage some of that labor constraint that we have. But when it comes to the rest of the year, I would tell you that what you're seeing in these quarters are the kind of returns we expect to replicate as we move on and expect to chin the bar on that 130 basis point expansion over 2020 and then.

Okay. And lastly, just a clarification, cash flow from ops, $300 million, and then $50 to $55 million of free cash is the expectation for the year?

That's accurate. You know, one thing we mentioned a little bit, and I spoke to in prepared remarks, and it's something we see a little bit occasionally as the quarters roll on and off is the timing of some working capital, just where our month ends come. And as you can see, we mentioned in the two days immediately after Succeeding in the closing of the books, we put another $26 million of cash on the balance sheet that would have otherwise flown to cash flow from ops, and we expect that to normalize a little better for the year, so we feel pretty good about that $300 million number.

Yep, and that's, you know, a free cash flow yield getting up toward the mid-teens. Lastly, just in terms of capital allocation, you bought back a few shares this quarter. I know growth is obviously first and foremost in your mind, but, you know, given where the stock is today relative to that cash flow, just your thoughts around maybe being more aggressive in terms of investing in your own shares as well as in organic initiatives. Thanks again for the call.

Thanks, Dan. This is Jake once again. As you know, we continue to be very focused on our capital allocation, and we think it's pretty balanced between everything from our dividend policy to our acquisition strategy and, of course, our reinvestment in our shares, as you mentioned. This past quarter, we continue to be opportunistic as we evaluate where the opportunity may lie in bringing in some of the shares, and certainly with some of the volatility we saw, presented a pretty good opportunity for us to invest in the business, and that's a good investment for us, as well as continuing to plow money into our cap allocation for these great buys that we had in the quarter to include Alpha and Hyperform, or the CDEC product, which obviously, hopefully folks have some time to take a look at those and come away as impressed as we have been with their, not only the acquisition, but the performance.

Very good. Appreciate the color. We'll follow up later. Thanks.

Thanks, Dan. Thank you. Our next question has come from the line of Scott Stemper with CL King. Please proceed with your questions.

Good morning, guys. Thanks for taking my questions. Congrats on a great quarter and congrats to Jeff. Thank you. Thank you. Jeff, you talked about, I guess, expectations for retail growth for this year. I think you might have made some broad comments for next year. But could you, you know, when looking at the recreation business, whether it's RV or marine, I know there's lots of puts and takes and tough comparisons, but how do you look at 22 just from a perspective of growth versus being flat versus potentially being down? And again, at retail.

Yeah, thanks. We still feel very optimistic about where things are headed. We see it right now in today's business, and we really feel the combination of where wholesale is against where retail is going into 2022 really gives us a pretty long runway for the restock of the dealers taking quite a bit longer than we thought. And the continued, if you look, There's continued retail demand out there, and it's strong throughout the country. So we're very optimistic about where things are headed for the rest of this year and into 2022.

Scott, this is Andy. I'll just add a little bit to that. Our channel checks between our transportation business, our discussions with our financing partners, and as well our discussions with the OEs are continuing to indicate that there's been no tail-off in retail demand out there. In fact, the quality of the buyers we've heard have improved as it relates to those coming onto lots and really looking to buy versus just kind of kicking the tires. So from our perspective, there's definitely a lot of demand out there. The inventories certainly are at a very, very low point. We think this carries for quite some time, and we're very optimistic about where retail is headed.

Got it. And then lastly, just touching base on the non-recreation businesses, Industrial, can you talk about residential versus non-residential, how that performs in the quarter? And then, M.H., maybe just talk about some of the retail demand that you're seeing, just how that shapes up for the rest of the year. Thanks. Sure.

This is Andy again. On the residential, non-residential side, I think we're seeing tremendous strength there as well. Residential housing, especially on single-family and multifamily, was very, very strong during the quarter. We're seeing a little bit of a shift on the high rise over to multifamily and to that single family side of the business, certainly given COVID and the remote opportunities that are out there today, but it still points towards strong demand in our business model across that platform. And then when you look at the MH business, it certainly feels like and looks like we've unlocked some capacity as it relates to the MH manufacturer's ability to increase production. I think we're getting our arms around you know, the labor scenario, and so things are coming back to normal, and we're very encouraged by what we're seeing on the M8 side of the business and the uptick that we've seen in production capacities out there. So, yeah, no warning signs on either one of those fronts. Perfect. Thanks again.

Thank you. Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. And we have no further questions at this time. I'll now turn the call back over to Ms. Julianne Katowski for further remarks.

Thanks, Daryl. We appreciate everyone for being on the call today and look forward to talking to you again at our third quarter 2021 conference call. A replay of today's call will be archived on Patrick's website, www.patrickind.com under investor relations. I'll turn the call back over to our operator.

Thank you, ladies and gentlemen. This does conclude today's teleconference. Thank you for your participation. You may now disconnect.