Patrick Industries, Inc.

Good morning, ladies and gentlemen, and welcome to Patrick Industry's second quarter 2022 earnings conference call. My name is Robert, 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 this conference is being recorded. I would now like to turn the call over to your host, Ms. Julianne Kotowski from Investor Relations. You may begin.

Good morning, everyone, and welcome to our call this morning. I am joined on the call today by Andy Nemitz, 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 2021, 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 Nemeth.

Thank you, Julianne. Good morning, ladies and gentlemen, and thank you for joining us on the call today. We're pleased to report our second quarter and first half 2022 results, which are a reflection of a number of factors, as we will discuss. Most importantly, the dedication and commitment of our team members to serve our customers, our Better Together culture, and the continued execution of our strategic and operational initiatives. Over the past 24 months, we've seen an incredible invigoration for the attractiveness of outdoor recreation and leisure lifestyle products. These meaningful and impactful quality of life alternatives prioritize quality time with family and friends and ushered in a significant increase in new leisure lifestyle participants seeking the enjoyment and exploration of the great outdoors. Additionally, both families and individuals found creative alternatives to travel, remote work environments, and experiences through the use of RVs, boats, and personal power sports Now there are more people than ever across the country participating in the leisure lifestyle experience, pointing towards continued participation rates and long-term optimism and growth potential in this space. As demand has outpaced supply over the same period, our industries have worked tirelessly to supply the tremendous demand created by this resurgence on top of what were already strong demographic trends and a positive outlook. While supply chain constraints and other challenges created by the pandemic impacted virtually all markets, we have been energized and inspired by the aggressive cadence, creativity, and innovation across all of our markets to meet customer demand and further promote the lifestyle. Second quarter and first half 2022 production run rates in the RV, marine, and power sports market, which represents 77% of our revenues, were strong, and RV OEMs continued to show their incredible agility, and ability to scale to meet strong demand and refill the dealer inventory channel. On the RV side of our business, which represents 57% of second quarter consolidated sales, first half wholesale production run rates annualized at over 600,000 units. We believe this strong production and scalability has recalibrated RV dealer inventories to an estimated new normal range, which Jeff will highlight, and that there will be disciplined and meaningful wholesale production declines with virtually all OEMs which we are already seeing and have been preparing for in the back half of the year to drive alignment and balance with retail on a go-forward basis. Ultimately, the RV OEMs continue to do a spectacular job of flexing their models to support and match up with retail demand, and the focus and attention to ensure this balance across the dealer inventory channel is evident. Alternatively, on the marine and power sports side of our business, which represents 20% of our second quarter revenues, We believe dealer inventory levels are still depleted from historical and expected new norms, pointing towards a longer refill window and strong production levels expected to last through the remainder of 2022 and likely into and possibly through 2023 until the dealer inventory channels are appropriately restocked and backlogs are reduced. Our manufactured housing and industrial markets, which are primarily residential housing based and represent approximately 23% of our consolidated second quarter revenues collectively, continue to benefit from similar dynamics, primarily the recognition and value of spending quality time with family and friends. Similar to leisure lifestyle over the past 24 months, strong retail demand and limited inventory levels have been prevalent in these markets as well. And we further believe the affordability and quality value proposition of MH will become even more apparent given current elevated housing prices and rising interest rates. Our MHN market, which represents approximately 13% of our revenue, serves OEMs who are working through healthy backlogs, and ASPs in the MA space are attractive when compared to current site-built housing prices. Finally, I will highlight our industrial market, which represents approximately 10% of our second quarter revenue. Even though single-family housing starts appear to be down, we are still seeing the benefits of do-it-yourself and multifamily builds that are not showing signs of weakness currently. To encapsulate and summarize, While production levels in the RV market are expected to materially decline for first half run rates, approximately 43% of our business, which is in the marine, power sports, and housing markets, is expected to be stable, if not strong, for the second half of 2022, highlighting our diversified model. We have been heavily investing in automation, infrastructure, and human capital initiatives over the same period to drive scalability as well. And this, in combination with our market strategic diversification initiatives, and disciplined capital allocation strategy should help bolster margins from the historical impact of such scale change in the RV market. Generally, consumers remain in a strong position with employment resilience. However, inflation and higher interest rates represent meaningful challenges for the consumer, and we are monitoring these factors closely. And finally, turning toward the numbers, our second quarter revenues increased 45% to $1.5 billion. Our year-to-date revenues increased 51% to $2.8 billion, and on a trailing 12-month basis, our consolidated revenues surpassed $5 billion. Our net income in the second quarter increased 98% to approximately $117 million, or $4.79 per diluted share. And adjusting for the impact of the accounting treatment for our convertible notes, our adjusted earnings per share was $5.20. Year-to-date, net income increased 115% to $229 million, or $9.33 per diluted share. Adjusting for the impact of the accounting treatment for our convertible notes, our adjusted diluted earnings per share was $10.14. I'll now turn the call over to Jeff.