Patrick Industries, Inc.

Good morning, ladies and gentlemen, and welcome to Patrick Industries' fourth quarter 2021 earnings conference call. My name is Melissa, and I will 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. I'll now turn the call over to Ms. Julianne Katowski. From Investor Relations, Ms. Gutowsky, 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 Petkovich, 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-end in 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. As we crossed the finish line for fiscal 2021 and reflected on the environment we and our customers operated in during the year, we remain energized and enthusiastic about the tremendous performance of our team members and many impressive accomplishments of our organization during an incredibly dynamic year. 2021 was strong for us across a wide platform of operational metrics where we meaningfully exceeded historical milestones in revenue, gross margin, operating income, operating margin, operating cash flow, dividends, and business acquisitions, among others. We continue to strategically diversify our leisure lifestyle platform with the addition of key new businesses in marine and marine aftermarket, as well as fortifying our portfolio of RV, MH, and industrial offerings. We completed 10 acquisitions during the year, representing more than $350 million in annualized revenues. We also amended our credit facility and broadened and strengthened our liquidity profile with two separate senior unsecured note offerings, which enhanced our patient capital structure. And while our family has grown to more than 11,000 team members, we've also leveraged the strengths of our culture and talent and grown profitably. While supply chain challenges impacted all major markets in 2021, our teams worked tirelessly in alignment with our customers' demands based on product availability and other factors to flex their schedules and pace and deliver to our end markets in three key areas. First, our strong liquidity profile and cash generation, along with our multi-brand production capacity and bandwidth, buying power, and procurement strength between brands to secure incremental inventory for our customers' production. Second, our continued strategic investment in automation and our information systems, which began in the second half of fiscal 2020, allowed us to further position our teams to adapt to the tight labor market conditions. And third, we invested in human capital initiatives that included enhanced employee benefits and wage programs, cultural alignment and connectivity, heartfelt and purpose-aligned employee-driven philanthropic programs, and focused leadership training and connectivity. These initiatives allowed us to improve the lives and maximize the talents of our people and apply their unique capabilities and tactical and strengths in strategic areas across our programs. 2021 was also a time for us to foster and grow our ESG initiatives as we work to reduce energy and material consumption, identify renewable energy sources, and most importantly, invest in our people and communities. Patrick's 11,000 team members are the rock solid and inspiring platform that helped move our markets in a positive, continually evolving and improving course. And in 2021 was a year in which our Better Together philosophy resonated across our organization, making us a better partner for all of our stakeholders. The support of this team, our suppliers, financial partners, and board of directors helped make 2021 an incredibly successful and exciting year, and also positioned us to be even stronger and more competitive for our customers and shareholders for 2022 and the years to come. We are extremely grateful and humbled by the collective efforts of our team members, who through their creativity, collaboration, and innovation have consistently delivered solutions supporting our customers, markets, communities, and purpose. From a market perspective, the leisure lifestyle markets represented 75% of our revenues in the quarter. The RV and marine markets continue to be driven by strong outdoor recreation trends, which have increased RV and boating activity and resulting demand from both new entrants and existing lifestyle participants. Manufacturer backlogs and lean dealer inventories positioned leisure lifestyle positively in the quarter and into 2022. Our housing and industrial markets replicated the demand strength of the leisure lifestyle markets. and represented approximately 25% of fourth quarter revenues. MH OEM backlogs continued to grow, and MH Fundamentals drove strong results against a backdrop of robust housing demand in tight conditions. Our residential housing and commercial markets were equally strong, bolstered as well by strong big box and retail activity. On the backs of a record wholesale unit shipment year in 2021 of more than 600,000 units in our foundational RV market, and the corresponding strength and tailwinds in our marine and housing and industrial markets, we also produced record financial results in 2021. Our fourth quarter revenues of $1.1 billion increased 49% or $375 million, and our net income for the quarter increased 61% to $61 million, and we earned $2.62 per diluted share. Our full year revenues of $4.1 billion increased 64% or $1.6 billion, Our net income increased 132% to $225 million, and we are $9.63 per diluted share. And I'll 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 of $674 million in the fourth quarter were up $228 million, or 51%, and represented 59% of our consolidated sales. RV and wholesale unit shipments were up 13%, totaling approximately 147,600 units for the quarter. Retail unit shipments decreased 16% to approximately 86,000 units in the fourth quarter. This decrease in retail unit shipments is attributed to continued limited model availability, as well as being consistent with traditional seasonal winter retail demand trends, especially in comparison to the Q4 2020 backdrop where retail fulfillment occurred far later in the year due to COVID-related disruptions earlier in 2020. With the emergence of some winter restocking, RV dealers are well positioned, yet not back to historical inventory stocking levels, to meet strong continued retail demand in the initial selling months in the first half of 2022. Seasonal winter buying patterns, typically lightest in the winter months, coupled with the RV industry's unique and distinct ability to continue to flex production levels beyond what would be expected given the supply chain constraints, have allowed dealers a better opportunity going into 2022 to establish a solid initial base to sell from, which compared to an extremely bare level earlier in 2021, which we believe constrained retail sales overall in 2021. Record OEM reported backlogs continue to point to a strong expected 2022 retail season. Our estimates indicate the recalibration of dealer inventories has just started with TTM weeks on hand at the end of December 2021 up 27% to approximately 11 to 12 weeks from December 2020 estimated comparative weeks on hand at approximately eight to nine weeks. This level is significantly below our estimates of approximately 26 to 30 weeks historically carried on average across the industry pre-pandemic. Despite the modest build in dealer inventory, dealer inventories are down 29% when compared to 2019 on retail sales that are up 22% on a TTM basis. Further, in looking at the durability of RV and markets, we point to the demographic shift which indicate positive long-term structural changes in composition of RV owners. According to the RVIA, 72 million Americans plan to go RVing in 2022, and KOA has reported that advanced bookings in 2022 are up 51% over 2021 bookings. Additionally, an estimated 69% of new RV owners are millennials and Gen X, with growing Gen Z demographics. Millennials currently spend the most on RV purchases, with an average purchase of $82,000, and 84% of these participants plan on purchasing a new unit in the next five years. The increasingly diverse composition of RV owners, including growing demographics of single individuals, many of whom are seeking increasingly more remote areas for their camping locations, and the flexibility of the units to support more boondocking, continue to fortify a loyal and growing baseline of lifelong RV enthusiasts. On the acquisition front, while we continue to strategically diversify our market mix, we also continue to invest in our fundamental RV platform with the acquisition of the industry-leading Alpha Systems and its new product capabilities, including highly engineered and proprietary offerings in adhesives, sealants, membranes, and butyl tapes to the RV space, as well as our other end markets. Now turning to the marine industry, which Andy mentioned has been an active part of our strategic diversification strategy in alignment with our belief in long-term potential of the leisure lifestyle markets. Our marine revenue increased 81 million or 75% in the quarter to 189 million and represented 16% of our sales, up from 14% in the fourth quarter of 2020. Marine wholesale unit shipments were relatively flat fourth quarter of 2021 from 2020 due to the capacity limitations as a result of supply chain constraints. On a pro forma run rate basis, we expect our marine revenues are approaching nearly $1 billion in annual sales and constitute a meaningful strategic diversification in our end market mix. Retail demand for boats has not fallen off, and while marine retail sales in the quarter decreased approximately 5%, primarily due to lack of inventory on dealer lots and the capacity constraints previously mentioned. Our estimates indicate that dealer inventories and weeks on hand have gotten worse when compared to December of 2020. We estimate that the TTM weeks on hand at the end of December 2021 are approximately 12 to 13 weeks, down from an estimated 18 to 19 weeks on hand at the end of December 2020, or an estimated decrease of dealer inventories of approximately 35% year over year. This represents an even more dramatic decline than our estimates on the RV front, and we believe historical marine inventory levels approximated 35 to 40 TTM weeks on hand on average across the industry. Based on these current estimates on our channel checks, OEM production requirements indicate channel fulfillment production level needs well into 2023 and likely into 2024 to restore dealer inventories to acceptable levels and even estimated new normal levels. Marine market trends are durable, not only from an OEM production vantage point, but around the overall consumer environment for the 100 million Americans who go boating each year. New boating entrants are sticking with boating, and new and existing boaters continue to drive demand not only for new boats but aftermarket parts and accessories. Our marine aftermarket business has grown to over $128 million of annualized revenue. The addition of Wetsounds, Seadog, Seadeck, Coyote, Tumex, and Williamsburg in 2021, along with our existing profile of OEM and aftermarket products, extends our capabilities to fulfill the needs of both OEM and marine aftermarket growth. The marine space is driven by new participants across a diverse range of demographics who seek the freedom and versatility of water-based recreation and the amenities of boating which fosters, similar to the RVN markets, work and study from home opportunities, pet-friendly accommodations, and the portability of marine lifestyles to satisfy a variety of objectives. Even with the expected production increases in 2022, Supply continues to be outpaced by new entrants, existing boat owners who are upgrading or adding to their fleet and a growing boat club consumption of new boat production. Demands for new boats with the latest amenities and features poises OEM production and ideal supply demand dynamics that we predict will continue until later stages of 2023. I will now talk a little bit about our housing and industrial side of our business, which Andy has mentioned collectively approximated 25% of our overall revenues for the quarter. Our manufactured housing sales of 151 million represented 13% of our total revenues in the quarter, increasing 24% over the fourth quarter of 2020, on an increase of MH wholesale unit shipments of 7%. MH OEMs are experiencing some of the most attractive market conditions in the last decade, with ASPs increasing in the quarter and during the year and across all MH unit types. Despite the very strong production run rate volumes, backlogs continue to break record levels with very few order cancellations. OEMs have responded by investing in new plants and expanding capacity of existing plants to meet consumer demand. The acceptance of MH as a viable alternative to site-built continues to accelerate. as does MH relative cost advantage in the environment of rapid inflation, labor constraints, and rising interest. Consumer demand for MH units remains especially durable and will continue to be a growing factor in the accommodation of the overall U.S. housing demand as site-built single-family housing grows increasingly out of the reach for many families. Growing MH communities, the momentum of urban to suburban migration, and the attractiveness of MH housing in comparison to the pricing for site-built homes all poised a long-term outlook for the MH to be a strong driving factor in our profitability and revenue mix going forward. Revenues in our industrial market sector, which is primarily tied to residential housing and home improvement, were $134 million, or 12% of our overall sales mix in the fourth quarter, increasing 39% to the prior year. Total housing starts for the fourth quarter of 2021 increased 5%, with multifamily housing increasing 39% in the quarter. Home builders continue to experience an increase in backlogs, as well as a decrease in backlog conversion, which means homes are taking longer to build. As a result of the sharp increase in both single and multifamily housing in 2021, further driven by work and study from anywhere demand, many consumers have decided to remodel their existing homes rather than purchase a new home. As a result, our industrial sector greatly benefited from DIY and home improvement activity, and demand from our big box customers was exceptionally strong during the quarter and the year, and we see these trends continuing into 2022. I'll now turn it over to Jake, who will provide additional comments on our financial performance.

Thanks, Jeff, and good morning, everyone. Our consolidated net sales for the fourth quarter increased 49% to $1.1 billion, driven by increases in our RV, marine, MH, and industrial primary end markets. For the year, net sales increased 64% to $4.1 billion. Revenue from our leisure lifestyle markets, which are comprised of RV and marine, increased 56% with RV and marine revenues up 51% and 75% respectively. RV content per unit increased 24% $4,006 per unit, and marine content per unit increased 76% to $3,632 per unit. Revenues from our housing and industrial markets increased 30% in the quarter, with MH revenues up 24% versus the prior year, industrial revenues up 39% compared to the prior year. MH content per unit increased 13% to $5,153 per unit. Gross margin in the fourth quarter was 19.8%, increasing 140 basis points compared to the prior year. The gross margin for the year was 19.6%, increasing 110 basis points from prior year. The size and scale of our operations, applied against our focused leverage of fixed costs while still making investments in our infrastructure to support our strategic growth plans, helped to highlight some of our capabilities to our customers in the unlocking capacity, purchasing power, and the scope of our footprint to bring resources to our growing markets. Our operational platform is designed to anticipate and accommodate run rate changes of demand, technically improving the execution of our team's operations and production efficiencies. Our platform is further enhanced by strategic investment in processes and technologies that help translate into more effective production and delivery of our products. Warehouse and delivery expenses decreased 20 basis points for the quarter and 60 basis points for the year as the scale of our operations benefited from an increase in the volume of activity and the associated leveraging of fixed costs. Operating expenses for the quarter were 11.5% of sales compared to 10.4% in 2020, primarily attributable to an increase in SG&A expenses. These increased costs reflect the incremental impact of higher costs related to our acquisitions, as well as increased incentive compensation to reward our people as a result of our performance, in addition to investments in processes and continuous improvement in our human capital management initiatives. The full year operating expenses were 11% of sales compared to 11.5% in 2020, Beneficially impacted by strong revenue growth relative to our ongoing investments in human capital as we continue to actively manage our cost structure in alignment with our revenues. Operating income of $95 million increased 52% in the fourth quarter and operating margin of 8.3% increased 30 basis points. For the full year, operating income of $352 million increased 103% and operating margin of 8.6% increased 160 basis points. Our diluted earnings per share in the fourth quarter was $2.62, up 60% from $1.64 in the prior year, and $9.63 for the year, up 129% from $4.20 in 2020. Our overall effective tax rate was 22% for the fourth quarter of 2021 compared to 26% in the prior year. Our overall effective tax rate for the full year of 2021 was 23% compared to 26% in 2020. The quarterly and year-over-year decreases both reflect changes in state taxes and related apportionment. We expect our overall effective tax rate for 2022 to be approximately 25%. Looking to cash flows, we generated approximately $105 million of operating cash flows for the fourth quarter of 2021, an increase of 121% compared to $47 million in the prior year quarter. For the year, we generated $252 million of operating cash flows, an increase of 57%. The strong generation of operational cash flow in the quarter and year occurred despite our deliberate investment in inventory as we prepared and positioned our operational platform for an expected strong start to fiscal 2022 in all four of our primary end markets. We expect our year-end investment in inventory to translate into the strong operating cash flow generation in the first half of 2022 driven by OEM production and leisure lifestyle and housing. In alignment with our strategic investments in automation and capacity expansion initiatives, as well as our discipline capital allocation strategy, we invested $21 million in capital expenditures for the quarter and $65 million for the full year, an increase of $33 million over 2020 for the full year. These investments support our proactive approach to drive scalability both up and down by utilizing more advanced automation, technology, and AI, which will support higher value-add and capacity for our customers for the long term. Currently forecast 2022 capital expenditures to approximate $90 million in alignment with this strategy. Strategic investments and business acquisitions total $210 million for the fourth quarter and $520 million for the year. In the quarter, we acquired Wet Sounds, Inc., a designer, fabricator, engineer, and distributor of innovative audio systems and accessories, including amplifiers, tower speakers, sound bars, and subwoofers sold direct to OEMs, consumers, dealers, and retailers, primarily within the marine and power sports markets. In addition, we introduced into our portfolio Williamsburg, a manufacturer of seating for the RV and marine end markets sold primarily to OEMs in these markets. Both acquisitions represent the continuation of our strategic expansion of our marine and RV product portfolios and custom marine OEM and aftermarket solutions. In December, we opportunistically completed the offering of $259 million of 1.75% convertible senior notes to continue to position our capital structure with dry powder and flexibility. These notes will mature in December 2028, and we structure the notes to require us to pay cash for the par value of the notes and not issue shares, which will therefore not be dilutive to earnings as a result. In fourth quarter, in accordance with our dividend policy, we've returned $8 million to shareholders in the form of quarterly dividends an annualized increase of 18%, and we further deployed $17 million in the form of share repurchases. Dividends for the year totaled $27 million, and share repurchases for the year totaled $49 million, or a total of 612,325 shares repurchased. In January of 2022, our Board of Directors approved our increased share repurchase authorization to $100 million. We expect to continue to tactically target share repurchase in 2022 based on market conditions and valuations that we believe reflect attractive returns to our shareholders and on our investments. At the end of the fourth quarter, we had approximately $532 million of total liquidity comprised of $123 million of cash on hand, unused capacity in our revolving credit facility of $409 million, and a total net leverage ratio of 2.3 times. This leverage and liquidity profile positions us to be very flexible and operate our business under a variety of strategic scenarios. And most importantly, our debt maturity schedule represents patient capital with the vast majority of our debt maturing in the 2027 to 2029 timeframe. As we head into 2022, we currently expect 2022 RV wholesale shipments to remain flat around 600,000 unit shipment level, and we expect retail shipments to be down mid-single digits. Based on these estimates, we expect the resulting build of dealer inventory to support a new normal baseline level of inventory that is expected to be discounted from pre-pandemic levels. In our marine market, we expect marine wholesale shipments to be up low double digits and marine retail to be flat to up low mid-single digits. Resulting inventory implications point towards lean dealer inventories throughout 2022 with restocking to appropriate levels not occurring until 2023 or even 2024. On the housing and industrial side of the business, we expect MH wholesale shipments to be up mid-single to high single digits for 2022, with retail sales absorbing available wholesale production on a real-time basis. And in our industrial end market, we expect 2022 new housing starts to also grow in mid to high single digits. That completes my remarks, and I would like to turn it back to Andy.

As discussed, we exceeded many positive milestones in 2021, alongside our customers, suppliers, and strategic partners. Our continued strategic diversification is producing results and we are continuing to expand our portfolio of highly engineered products to support our innovation initiatives for our customers in a more versatile end market composition. We expect to continue to expand our presence in both OEM and aftermarket product offerings in addition to our focus on innovation and new product development. Visibility for 2022 remains clear and positive. We expect RV to be in a healthier inventory position to not only satisfy strong consumer demand, but to provide a better overall consumer experience, which we are proud to be a part of with our product offerings. Marine production will continue to be driven by strong consumer demand and backlogs, and meaningful dealer inventories are not expected to build until 2023 or 2024. MH, residential housing, big box, and other industrial markets are expected to exhibit steady growth in 2022 and beyond. and fulfill critical fundamental housing and repair and remodel needs. Our liquidity and capital resources remain strong with available dry powder. Our acquisition pipeline is full, and our capital allocation philosophy remains consistently disciplined and thoughtful, providing us with both a foundation and vision for growth, profitability, and innovation. Our culture is strong and getting stronger, and our investments in human capital and related initiatives to improve the lives of our team members and communities will continue to be a focus in alignment with our core values. ESG continues to be a priority for us as we further drive our efforts around the continuous pursuit of a balanced and thoughtful value proposition that betters our environment, people, community, stakeholders, and shareholders. We expect to publish our first corporate sustainability report this year and will continue to humbly strive for excellence and servant leadership under our Better Together philosophy. And finally, we want to thank our customers, team members, board of directors, suppliers, business partners, and shareholders for your support as we drive our organization towards the goal of continuously increasing overall long-term shareholder value. This is the end of our prepared remarks. We are now ready to take questions.

Thank you. At this time, we'll be conducting a question and answer session. If you'd 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 two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Scott Stumber with CL King & Associates. Please proceed with your question.

Good morning, guys, and thanks for taking my questions.

Good morning, Scott.

Jeff, you were talking about, I guess, where dealer inventories are right now on the RV side, I guess, based on weeks on hand and pre-COVID. We're not even remotely close to that, but we're just trying to get a sense. Can you guys come up with what you think the new normal would be at some point, whether we get back to those 20, 30 weeks on hand or maybe somewhere in between where we are now and that?

Yeah, Scott, great question. Yeah, we've looked at that, and we believe that just talking to – You know, kind of our checks that, you know, that 18- to 22-week range are about 30% less, so lower than where we were prior pre-pandemic is where we're going to land. So, you know, we still have a pretty good runway to get there and get them to that position.

Got it. Okay. And on the margin side, you know, great job, obviously. with all the automation projects you guys have in place, price increases and so forth. But what is the narrative that we should be looking at for operating margin expansion for 2022? Are we still in that, I guess, 30 to 50 basis point range, or do you foresee any upside to that?

Scott, this is Jake. I appreciate the question. And as you've seen through the year, we definitely performed pretty well in the expansion, particularly our operating margin up 160 basis points versus what we had at the end of fiscal year 2020. And I appreciate that as the year progressed quarter to quarter, we continue to expand that range. And as we transition here into 2022, we're still thinking back to that 30 to 50 basis point expansion, we feel pretty good about that. But to your point, we do believe there's upside to it as we see how the real volumes play out and the continued adoption and implementation of what's really making a meaningful impact on that, which is the automation that you referenced and our ability to continue to be nimble and be more efficient at all the things that we do.

And then last question before I jump back in the queue. Aftermarket seems to be getting to be a bigger and bigger piece of the business for you. I know the Wet Sound acquisition certainly helped. Can you maybe talk about how big overall aftermarket is right now and where that's heading in a timeline, how big it could be?

Scott, this is Andy. Without question, we're excited about the aftermarket. I think there's a ton of opportunity in particular. We've had it in our marine businesses as we've kind of gone forward here. We're close to probably $150 million, $160 million all in on aftermarket today. And we expect to meaningfully expand that as we go forward with opportunities, not only within the marine business, but within our RV businesses as well. And so a lot of opportunity there. We're pretty excited about it. We're pretty excited about the runway that's there and looking to build on that and along with our OEM mentality.

Got it. Thanks again.

Thank you. Our next question comes from the line of Daniel Moore with CGS Securities. Please proceed with your question.

Thank you. Good morning. Thanks for taking the questions. Your RV content growth up 24% in Q4. Can you just talk about how much of that was acquisitions? What did it look like organically and of the organic piece? How much was volume and how much was price?

Sure, Dan. It's Jake. A little less about the RV and Q4, where we had some contribution from some of our 2021 acquisitions, most notably the Alpha Systems acquisition we made in the April timeframe, as well as a few others with the fusion and a few others. But maybe take a step back and talk about the overall contribution for the overall fourth quarter, as we're up 49.4% on a total revenue basis. We're about, for the enterprise, which again, as you can appreciate, has weighted more towards marine, at least this year it has been, We're up 12% on acquisitions. Industry growth is about 10% up. Pricing, 18%. But one of the things we're really focused on is we're up about 9% to 10% from an organic basis after you peel away some of those other layers, which is really a testament to our ability to leverage our scale and our relationships to continue delivering when other folks might stumble a bit or be stocked out and put us in a position where we can take share, which is something that's accelerated through the full fiscal year of 2021 and certainly showing well in fourth quarter. Whole year, a little bit spreads out a little bit more. As you know, we got 64% up year over year. 14% of that acquisitions industry is 27%. Pricing 16%. And then from an organic perspective, that's down in the 7% range. Still very strong and greater than the 3% to 5% we've consistently talked about over time. And that resonates through both our overall revenue contribution, but as well as our content, which is, as you can appreciate, we've talked about here today is is up measurably on a quarter-for-quarter, year-over-year basis, calculated on a TTM basis.

That's super helpful, Jake. That answers three questions, and I only asked one. So maybe talk about pricing. As we went through the quarter and into January, do you continue to take price, and how much of an uplift do we expect to see in Q1 and 2022 based on the pricing initiatives we've taken, either in dollar or percentage terms?

Yeah, this is Jeff. We continue to take pricing out to the market through the fourth quarter. We are seeing some of that continuing into 2022, not really at the levels we were at in the third and fourth quarter of 21. So as a percentage, it's probably about half of where we were in those quarters going into this year. And we see some leveling out in a few of our areas, but then there is some volatility along some of the commodities that we see out there. We've seen some of them kind of go down, maybe in lumber and aluminum, and then start to really start to head back up. So we're watching those closely and passing along as we see them.

As we've kind of looked out, Dan, this is Andy. We're looking at commodities. There'll be some puts and takes. I think certainly as supply chain eases up, which is our expectation as we move throughout this year into Q2 and Q3, we're expecting you know, some of that to happen, which is a good thing from our perspective. And so, you know, I think while there may be some pricing going out right now, we're anticipating as well in the back half that we might see some pricing come back, which is a good thing, again, on the inflationary side. So we're looking forward to kind of that model. But our expectation is kind of puts and takes flat for the year on pricing, plus and minus.

Okay. Maybe one more. You mentioned strength, incremental strength we're seeing in the MH side of the business. Are there organic or inorganic opportunities to expand share? Hasn't been a big focus of M&A up until this point. Wondering if that might shift given the longer-term supply-demand outlook. Thanks again.

Yeah, thanks. So we think in the MH market there's plenty of upside for us just organically throughout our organization. We've really kind of put a lot of our groups together to work towards a more consolidated look at the MH market and cross-sell some of our brands and some of our products. So we've been able to do that this year. We've seen some tremendous growth, as you can see by the numbers we put out today as far as versus wholesale shipments. And we've got some opportunities with new players on the supply side and our distribution channels, which will give us a lot of upside opportunity in 2022 and beyond. So a lot going on there.

I think there's some M&A opportunity, Dan. I think what we get excited about on the M&A side is that that business for us is highly leverageable. And so as they continue to gain capacity with the strengths of the backlogs that are there, our business organically is leverageable from a fixed cost perspective. And so we look forward to the upside on M&H, whether it's organic or M&A. So there's opportunities either way for us. We're going to look at both of them.

All right. I'll jump back with any follow-ups. Thanks.

Thank you. Our next question comes from the line of Craig Kenison with Baird. Please proceed with your question.

Hey, good morning. Thank you for taking my questions as well. Really a big picture question here, but there's a wide gap between your results today and the outlook for this industry and then the seven times earnings multiple or less that you trade at. What's your explanation for what the market may be missing here.

Greg, this is Andy. Thanks for that question. We question that ourselves, you know, as we look at our results and where we've performed. I think, you know, from a business model perspective, you know, we feel really good about the platform and the leverageability of the platform. We're brand-fronted. We go to market through our brands. And so, you know, I think there's probably some confusion there as to how leverageable that profile really is. But overall, you know, with our Better Together philosophy, we've got tremendous connectivity and collaboration. And we can leverage capacities between brands, you know, as we go to market with different product offerings and product opportunities. And so we look for a good, better, best kind of type of product offering for our customers and believe that, you know, that's a great focus for us. So I think as we look at the model, you know, our aftermarket business is growing. We've got a lot of leverageability on the platform as well as our fixed cost structure. So, you know, we need to do a good job of telling the story about the company. And I think that from our perspective, you know, we think it's a great story to the market. So we're working on that is what I'd say. But overall, I think from a communication perspective, you know, there's a lot of great things. And our team members, you know, really work well together. We've got a humble philosophy here, you know. And so for us, you know, we want our results to speak for ourselves. And so... We're going to do some bridging of that messaging. But overall, you know, we love the brand platform. It's been phenomenally successful for us. Our team members are well connected. We leverage synergies across the platform, you know, and it's not as visible under the brand fronted model. But overall, you know, we get excited about the connectivity that's there and we leverage that, you know, every day through our team members. So we've got phenomenal teams, phenomenal leaders across that brand spectrum and and they've done a great job of driving results, and we want to continue to tell that story in the right way.

Thank you. And then, of course, the balance sheet looks very well prepared for M&A if you want to pursue that, but your stock's super cheap as well. How does the board weigh share repurchase versus M&A, and are the deals that you're looking at as affordable as your own stock?

Yeah, I mean, I think that if you look at where we're trading today, you know, our EVs just a little over six times, you know, and we're looking at deals that are six to eight times. You know, what I tell you is from a valuation perspective, if you look at, you know, we bought 600,000 shares, more than 600,000 shares back in 2021 at an average price of about $80. We bought 166,000 shares back in January at an average price of a little less than $70. So, you know, I think as we look at capital allocation, the strength of our cash flows, we've got a lot of options on where to deploy that capital and invest in the business to drive returns. We're certainly active. We just came out with our new $100 million authorization on stock buybacks. So there's tremendous appetite, you know, to continue to drive value for our shareholders. And our acquisition pipeline is full as well. So, you know, I tell you, Certainly we want to drive valuation on the share price without question, but there's a lot of opportunity for us to continue to invest in the business and deploy that capital thoughtfully. So we're going to continue to do that and continue to try and drive those returns.

Thanks. I guess lastly, I'm very familiar with boondoggles, but I'm less familiar with boondocking. Could you just explain what that trend is all about?

Yeah, it's given people the opportunity to really just go anywhere with their RV, be able to, without shore power and connecting, be able to go and turn on the generator or go with battery power, however they're able to do it nowadays, and live off the grid and do that. And there's several opportunities out there. There's wineries throughout the country now that are offering the ability to come on their property and and stay for the night, it's opened up a wide variety of new opportunities for RV enthusiasts to see the whole country. So it's really exciting to see with solar and some other things that the RV OEMs are doing, it's giving the RV user a lot more opportunities to do that throughout the country.

Awesome. Thank you so much. Thanks, Craig.

Thank you. Ladies and gentlemen, as a reminder, it's a star one to ask a question at this time. I'll pause a moment. Thank you. It seems we've come to the end of our question session. I'll turn the floor back to Ms. Julianne Katowski for final remarks.

Thanks, Melissa. We appreciate everyone for being on the call today and looking forward to talking to you again at our first quarter 2022 conference call. A replay of today's call will be archived on Patrick's website, www.patrickind.com, under For Investors. And I'll turn the call back over to our operator.

Thank you, ladies and gentlemen. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.