Patrick Industries, Inc.

Good morning, ladies and gentlemen, and welcome to Patrick Industries' fourth quarter 2023 earnings conference call. My name is Paul, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the call over to Mr. Steve O'Hara, Vice President of Investor Elections. 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 Nemeth, CEO, Jeff Rodino, President, RV, and Matt Feiler, Interim CFO, as well as Kip Ellis, Patrick's President, Power Sports and Housing, who is available for Q&A and is joining us remotely. Certain statements made in today's conference call regarding Patrick Industries and its operations include, 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 2022, 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 turn the call over to Andy Nemeth.

Thank you, Steve. As we look back on fiscal 2023, I am incredibly proud of the efforts our team has shown as they continue to deliver solid and resilient performance and results in a challenging environment. Despite sharply lower shipments across our end markets, as we face macro and industry headwinds attributable to high inflation and interest rates, our business generated strong revenue, margins, profits, and cash flow, particularly when compared to the pre-COVID time period when our business was less diversified. For the full year, we achieved record gross margin, delivering on our operating margin target, and generated record-keep free cash flow. To highlight the evolution of our business and the benefits of the strategic diversification and investments we've made, we'll compare the full year's 2023 results with full year 2019. This year, RV wholesale unit shipments declined 37% and were 23% lower than 2019. Despite the materially lower unit volumes and less favorable environment, total revenue in 2023 was 48% higher than 2019. Gross margin was 450 basis points higher and operating margin was 90 basis points higher. EPS was 69% higher and free cash flow was more than twice what we produced in 2019. on significantly higher interest rates. We expect to continue to drive our growth trajectory with the execution of our strategic plan. And our team's hard work and determination has continued to position us to actively pivot where necessary to stay nimble and flexible. Our foundation is solid as we spent the year streamlining our model and placing our company in a great position, not just to weather the uncertain macro environment, but to proactively grow our company through our successful diversification and automation strategy among other strategic and capital initiatives. We optimized our cost structure based on current run rates in our markets, paid down debt, actively managed and reduced our inventory, and improved our operating efficiencies. We invested in our financial and operational infrastructure through software and IT, automation, and new product innovations. In 2023, we allocated capital to ensure our company is ready for future end market improvement, while preparing us financially and structurally to make bolt-on and more significant acquisitions that align with our future growth objectives. In 2023, we acquired Patrick Marine Transport, a leader in marine transportation that complements our existing RV transportation businesses. In early January, 2024, we acquired Sport Tech, our largest acquisition to date, which adds significant scale in power sports, increasing our total addressable market, enhancing our businesses runway for growth, and improving the diversity of our revenue, profit, and cash flow. On the human capital side, we continue to support our people in 2023 as we quietly and thoughtfully invested in leadership development training while also continuing to meaningfully give back to our communities through our philanthropic efforts and team member engagement. As an organization, we have elevated the way we think about our RV, marine, and power sports end markets to the outdoor enthusiast space At Patrick, we are enthusiasts. We are active in the outdoors, enjoy camping, RVing, boating, fishing, motorcycling, off-roading, and other recreational and leisure lifestyle activities. Our team's passion is evident in what they love to do, the solutions they provide, and the care shown while building them. Our team members are proud to represent their brands and of their commitment to our customers. Whether on the road, off the road, on the water, or at home, We believe in empowering people to live their passions to the fullest, which drives our goal to be the supplier of choice to the outdoor enthusiast space. Financially, we have maintained a strong balance sheet and generated significant free cash flow through focused investments and prudently managing working capital. We have no major deficit charities until 2027. We ended 2023 with approximately $780 million of total liquidity, and we remain flexible and ready to pivot in response to market conditions and customer needs. We continue to be optimistic about Patrick's future and ability to generate free cash flow, which was reflected in our board of directors decision to raise our fourth quarter dividend by 22% to 55 cents per share. We returned $61 million to shareholders during the year in the form of stock repurchases and dividends and had 77.6 million left authorized under our current repurchase plan at the end of the fourth quarter. Looking forward to 2024, we are confident in our team's ability to navigate short-term headwinds and capitalize on opportunities to continue to profitably grow our company. We believe the first half of 2024 will look similar to the last few months of 2023 in respect to industry and macro trends, with some promising upside potential in the second half of 2024, especially if there is interest rate relief for both retail and floor plan financing. We will continue to utilize the appropriate levers to optimize our operations and maintain our strong financials, including maintaining a disciplined leverage position and prioritizing paying down debt after the Sport Tech acquisition, while still having the opportunity and ability to grow the company through targeted acquisitions and capital investment. As we think about strategic growth opportunities for 2024 and beyond, we continue to see the appeal in the premium segment of the outdoor enthusiast space. And with our acquisition of Sportec, we have solidified our presence as a leading component solutions provider to the power sports market. We expect to continue to strategically and organically expand our presence in RV, marine, and power sports in conjunction with our strategic focus on the broader outdoor enthusiast space and the aftermarket. The end result, we are positioned well as we start 2024 with ample liquidity and a solid capital structure. and are poised and ready to accelerate our company's growth. Highlighting our financials, our fourth quarter revenues were $781 million and net income was $31 million or $1.41 per diluted share. For full year 2023, we generated revenue of $3.5 billion, leading to net income of $143 million or $6.50 per diluted share. As we noted in the press release this morning, The quarter's results included approximately $0.08 of one-time non-recurring charges related to severance, facility consolidations, and significant tornado damage to two of our facilities in the Nashville, Tennessee area in December, net of favorable fair value measurement adjustment. For the full year, we estimate these non-recurring items tallied approximately $0.21 per share. And finally, highlighting our increased focus on driving our business and business performance in alignment with our Better Together culture, we have implemented several exciting changes and enhancements to our organizational structure, reflecting the strength of our bench and elevating the responsibilities of several of our team members. Jeff Rodino has been named President of RV in addition to his current responsibilities. Kip Ellis has been named President of Power Sports and Housing. Rick Ranger has been named President of Marine. Hugo Gonzalez has been named Executive Vice President and Chief Operating Officer. and Charlie Rader has been named Executive Vice President of Sales for the organization. I'm extremely energized and excited about the incredible talent in our organization and congratulate our senior team on their new roles. I'll now turn the call over to Jeff, who will highlight the quarter and provide detail into our end markets.