Patrick Industries, Inc.

Good morning, ladies and gentlemen, and welcome to Patrick Industries' third quarter 2022 earnings conference call. My name is Kevin, 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, please press star zero on your telephone keypad. Please note this conference is being recorded. It's now my pleasure to turn the call over to Mr. Steve O'Hara, Vice President, Investor Relations. Mr. O'Hara, you may begin.

Good morning, everyone, and welcome to our call this morning. I am joined on the call today by Andy Namath, 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 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 release our Form 10-K for the year ended 2021, and in our 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 Namath.

Thank you, Steve. Good morning, ladies and gentlemen, and thank you for joining us on the call today. I'd like to begin my remarks by welcoming Steve O'Hara, our new VP of Investor Relations, who joined us in September. He brings over 15 years of experience as sell-side analyst, including previous coverage of Patrick and our end markets. We're pleased to have Steve on the Patrick team as we continue driving and communicating our long-term strategy to create shareholder value. Julianne Katowski, former director of investor relations, has moved into a new role as senior director of philanthropy and stakeholder engagement, where she will continue to be involved in shareholder services and remains a valued member of our leadership team. On behalf of the entire Patrick family, we would like to offer our thoughts and prayers to those impacted by the devastation caused by Hurricane Ian. We have several operations, team members, and friends located in the region and are extremely saddened by the loss of life and destruction. We wish our impacted team members, their families, and others affected by this storm a swift recovery. As we have in the past, we stand ready to bring our expertise, resources, and products to assist in the recovery from this event and will partner with our breadth of customers across our key industries to help provide solutions, assistance, and relief. Moving to the third quarter results, I want to thank our team members for their continued efforts and dedication as we work within our Better Together culture to drive improved performance despite ongoing recalibration in the RV industry. We achieved year-over-year growth in revenue, gross profit, and net income despite a 40% decline in RV wholesale production from both the 2021 third quarter and sequentially from the second quarter of 2022. As proof point to demonstrate the resiliency of our business model, strength of our product portfolio and improved diversification, consolidated sales increased 5% despite a 17% decrease in sales in the RV market, a true testament to the strategic evolution we have accomplished. Following the year over year production increases experienced through the first half of 2022, at an annualized run rate of more than 640,000 units. As we anticipated, RV OEMs recalibrated production starting in June, leading the industry to a more optimal dealer inventory scenario that we see today alongside post-pandemic consumer demand. We applaud the discipline and scalability displayed by our OEM partners and believe their actions are appropriate and reflect the realities in the market and better position the industry for long-term health and growth. While RV demand normalized, Marine demand remains strong in the quarter, with dealer inventories still well below historical averages. Our marine business represented 24% of our third quarter revenue, and on a pro forma TTM basis has grown to be over $1 billion in sales for the first time in our history. Our AMH and industrial businesses, which represented 29% of our third quarter revenue, predominantly serve the U.S. housing market. These businesses also performed well during the quarter, And combined with our marine revenue, bolstered margins, and more than offset the decline in sales to the RV market. Although marine, MH, and residential housing will likely face headwinds from rising interest rates and a slowing economy, we believe the long-term trajectory remains positive. The marine industry has a longer runway for inventory channel refill, and MH offers a solid option for plugging the country's affordable housing inventory gap, given its 25% to 50% lower price point, versus a similar site-built home. MHOEMs have overcome supply chain disruptions, added capacity, and gained efficiencies in their existing plants. In the last quarter, most have made progress in catching up with the retail home-oriented backlog and are able to supply retail homes with a lead time more in line with the pre-pandemic period. Many OEMs are shifting their production to focus on home design for rental communities, where developers and REITs are able to better withstand rising interest rates. Many of these homes will be used to fill a growing consumer need in the affordable rental market. We believe that our diversified portfolio and more resilient margin profile, infrastructure base, and strong balance sheet have put us in a position of strength to operate in these uncertain times and navigate the dynamic macroeconomic and geopolitical environment that is challenging us and our industries, thus further allowing us to strategically take advantage of opportunities that present themselves. Supply chain pressures have eased in the RV industry and are easing in our other markets, and freight rates are returning to historical norms. We believe inflation and rising interest rates will likely be headwinds for our markets, as a larger portion of the family budget will be dedicated to non-discretionary spending. We continue to monitor consumer spending trends to understand how this may impact our end markets. The important factor for us is to remain scalable and flexible in our operations, and leverage the resiliency of our operating model to perform well in any environment. In addition to the benefit of a more diversified and balanced portfolio, our strategic acquisitions of premium products in the marine space also continue to increase our aftermarket presence, which tends to be less cyclical given its focus on demand for repair, replacement, and outfit products. Over the past five years, our RV market concentration has decreased 10 percentage points, despite RV revenue more than doubling. while EBITDA margins have improved more than 300 basis points. These results stem from our focused effort to increase penetration in the marine and housing markets, providing a more stable earnings profile and the increased earnings power you see today. Our acquisition strategy has strengthened our product portfolio and brought us tremendous team members, leaders, and bench strength, in addition to loyal customers and partners, and has made the Patrick family stronger. We remain committed to our capital allocation strategy to further enhance our earnings profile. While we will continue to pursue organic growth and accretive acquisitions, we also expect to continue our investments in automation, infrastructure, technology, and human capital to improve the efficiency of our operations. We are embracing innovation and expanding our deployment of robotics and automation in our factories, which will continue to position us to operate more efficiently and scale faster. which helps mitigate the risk of our labor dependence and allows us to transform the skill sets of our workforce. And finally, turning to the numbers, our third quarter revenues increased 5% to $1.1 billion, our year-to-date revenues increased 34% to $3.9 billion, and on a trailing 12-month basis, our consolidated revenues were approximately $5.1 billion. Our net income in the third quarter increased 2% to approximately $59 million, or $2.43 per diluted share, and adjusting for the impact of the accounting treatment for our convertible notes, our adjusted diluted earnings per share was $2.63. Year-to-date net income increased 76% to $288 million, or $11.78 per diluted share. Adjusting for the impact of the accounting treatment for the convertible notes, Our adjusted diluted earnings per share was $12.79. I'll now turn the call over to Jeff.