Fourth Quarter 2022 Highlights (compared to Fourth Quarter 2021 unless otherwise noted)
- Net sales of $952 million decreased 17%, with increased marine and manufactured housing revenue partially offsetting a 47% wholesale unit shipment decline in the RV end market
- Gross margin of 21.1% increased 130 basis points
- Operating income of $68 million decreased 29%
- Operating margin of 7.1% decreased 120 basis points
- Net income of $40 million decreased 34%
- Diluted earnings per share decreased 36% to $1.68, including a reduction of $0.14 per share for the impact of the accounting treatment for convertible notes
- Adjusted EBITDA of $108 million decreased 16%
- Operating cash flows of $182 million increased 74%
- Acquisition of Transhield
- Increased share repurchase authorization to $100 million
- Release of inaugural Responsibility & Sustainability Report in December
Full Year 2022 Highlights (compared to Full Year 2021 unless otherwise noted)
- Net sales of $4.9 billion increased 20%
- Gross margin of 21.7% increased 210 basis points
- Operating income of $496 million increased 41%
- Operating margin of 10.2% increased 160 basis points
- Net income of $328 million increased 46%
- Diluted earnings per share increased 40% to $13.49, including a reduction of $1.15 per share for the impact of the accounting treatment for convertible notes
- Adjusted EBITDA of $643 million increased 34%
- Operating cash flows of $412 million increased 63%
- Repurchased 1,325,564 shares for a total of $77 million and returned $33 million in dividends to our shareholders
ELKHART, Ind. – Patrick Industries, Inc. (NASDAQ: PATK), a leading component solutions provider for the Leisure Lifestyle and Housing markets, today reported financial results for the fourth quarter and full year ended Dec. 31, 2022.
Net sales in the fourth quarter of 2022 decreased $196 million, or 17%, to $952 million from $1.1 billion in the fourth quarter of 2021. Wholesale unit shipments declined 47% in the RV industry, which represents 43% of Patrick’s revenue in the quarter. Revenue growth in our marine and manufactured housing end markets partially offset the revenue decrease in our RV end market, and demonstrates the benefit of the company’s diversified portfolio of business.
Operating income of $68 million decreased $27 million, or 29%, from $95 million in the fourth quarter of 2021. Operating margin of 7.1% in the fourth quarter of 2022 decreased 120 basis points compared to 8.3% in the same period a year ago. The decline in operating margin was driven principally by fixed cost absorption related to the decrease in sales, increased infrastructure investments to support our growth and strategic diversification efforts, continued execution of our IT transformation initiatives, and an increase in amortization of intangible assets from recent acquisitions. This decline was partially offset by the continued realization of efficiencies related to automation initiatives and the contribution of our margin-accretive acquisitions.
Net income was $40 million, a decrease of 34%, compared to $61 million in the fourth quarter of 2021. Diluted earnings per share was $1.68, a decrease of 36% for the fourth quarter of 2022 compared to $2.62 for the fourth quarter of 2021. Diluted earnings per share for the fourth quarter of 2022 includes a non-cash reduction of $0.14 per share for the accounting treatment of convertible notes discussed below. Adjusted EBITDA for the fourth quarter of 2022 was $108 million, declining 16% versus the prior year period.
In the first quarter of 2022, the company adopted a new accounting standard that requires its 1.00% convertible notes due 2023 to be presented on an “if converted” basis in the calculation of diluted earnings per share. As a result of the adoption of this standard, the company’s fourth quarter and full year 2022 diluted earnings per share was reduced by $0.14 and $1.15, respectively. Prior year results do not reflect the adoption of the new accounting standard. These convertible notes were repaid in full at maturity on Feb. 1, 2023 and will not materially impact diluted earnings per share in 2023.
“We are proud of our team’s performance during the fourth quarter and full year as we navigated extremely dynamic market conditions and capitalized on our size, scale, flexibility, and resources in our efforts to service our customers at the highest level,” said Andy Nemeth, chief executive officer. “Our business model served us well in 2022, as we reported record full year revenues and profits, despite the RV OEM production recalibration that began in the second half of the year. Our ongoing efforts to strategically diversify our business continue to bear fruit as our fourth quarter results help demonstrate our portfolio’s resilience and ability to mitigate declines within individual end markets.”
Jeff Rodino, president, said, “Our investments into the marine OEM market and marine aftermarket helped bolster Patrick’s results in the fourth quarter and full year. Additionally, we have continued to invest in our infrastructure and culture to support our strategic plan and solidify the Company’s foundation for future growth. With new and younger buyers in the leisure lifestyle spaces and the continued limited inventory of affordable housing, we see the potential for long-term growth across our business.”
Fourth Quarter 2022 Revenue by Market Sector
(compared to Fourth Quarter 2021 unless otherwise noted)
RV (43% of Revenue)
- Revenue of $411 million decreased 39% while wholesale RV industry unit shipments decreased 47%
- Full year content per wholesale RV unit increased 31% to $5,257
Marine (27% of Revenue)
- Revenue of $255 million increased 35% while estimated wholesale powerboat industry unit shipments increased 11%
- Full year estimated content per wholesale powerboat unit increased 45% to $5,281
MH (16% of Revenue)
- Revenue of $155 million increased 3% while wholesale MH industry unit shipments decreased 12%
- Full year content per wholesale MH unit increased 21% to $6,243
Industrial (14% of Revenue)
- Revenue of $130 million decreased 2% while housing starts decreased 16%
Full Year 2022 Results
Net sales of $4.9 billion for the full year 2022 increased $804 million, or 20%, from $4.1 billion in 2021, reflecting strong demand for RVs in the first half of the year coupled with more consistent marine and housing demand throughout the year, as well as contributions from acquisitions completed during 2021 and 2022.
Full year 2022 operating income of $496 million increased $144 million, or 41%, compared to $352 million in 2021. Operating margin of 10.2% improved 160 basis points from 8.6% in the prior year. Net income of $328 million increased 46% compared to $225 million in 2021. Diluted earnings per share of $13.49 increased 40% compared to $9.63 in the prior year. Diluted earnings per share for the full year 2022 includes a non-cash reduction of $1.15 per share for the accounting treatment of convertible notes discussed above. Adjusted EBITDA for full year 2022 was $643 million, increasing 34% over 2021.
Balance Sheet, Cash Flow and Capital Allocation
Operating cash flow for the fourth quarter of 2022 was $182 million, an increase of 74%, compared to $105 million for the fourth quarter of 2021. Full year 2022 operating cash flow of $412 million increased 63% compared to the prior year due to strong profitability and diligent working capital management. Capital expenditures for the fourth quarter of 2022 totaled $16 million, a decrease of 20%, compared to $21 million in the fourth quarter of 2021. Capital expenditures for full year 2022 totaled $80 million, an increase of 23% from 2021, reflecting continued investments in automation, IT, and capacity in support of scalable growth. For the full year 2022, business acquisitions in RV, marine, powersports, and our industrial markets totaled $249 million, including the previously announced acquisition of Transhield in the fourth quarter.
In alignment with Patrick’s capital allocation strategy, the company returned $38 million to shareholders in the fourth quarter of 2022, consisting of $28 million in opportunistic repurchases of 516,922 shares and $10 million in dividends. For the full year 2022, we repurchased 1,325,564 shares for a total of $77 million and returned $33 million in dividends to our shareholders.
Patrick’s total debt at the end of the quarter was approximately $1.3 billion, resulting in a net leverage ratio of 1.9x (as calculated in accordance with our credit agreement). Available liquidity, comprised of borrowing availability under the company’s credit facility and cash on hand, was approximately $508 million, which was net of a temporary reserve of $202.5 million against our credit facility until the settlement of the company’s 1.00% convertible notes due 2023 as required by Patrick’s credit agreement. The reserve consisted of the $172.5 million redemption price for the 1.00% convertible notes and a required excess reserve of $30.0 million. The company repaid in full the 1.00% convertible notes at maturity in February 2023 through available borrowing capacity under the credit facility and cash on hand, releasing the $202.5 million temporary reserve.
Business Outlook and Summary
“We could not have achieved these results without the diligence, discipline, and dedication of our team members and the partnership we have with our customers and suppliers,” said Nemeth. “We are aggressively managing our working capital in alignment with projected demand levels and remain committed to working towards optimizing our capital allocation, which is key to our long-term growth strategy. We are confident in our business’s ability to generate free cash flow, as reflected in our decision to increase our quarterly dividend 36% to $0.45 per share and increase our share repurchase authorization to $100 million in the fourth quarter. We remain focused on meeting potential challenges ahead in 2023 and positioning our business for long-term success as we continue to invest in our infrastructure and strive to solidify Patrick as the first-choice component solutions provider in the leisure lifestyle and housing markets.”
Quarterly Cash Dividend
On Feb. 6, 2023, the company’s Board of Directors declared a quarterly cash dividend of $0.45 per share of common stock. The dividend is payable on March 6, 2023, to shareholders of record at the close of business on Feb. 21, 2023.
Conference Call Webcast
As previously announced, Patrick Industries will host an online webcast of its fourth quarter 2022 earnings conference call that can be accessed on the Company’s website, www.patrickind.com, under “For Investors,” at 10 a.m., Thursday, Feb. 9, 2023 (Eastern time). In addition, a supplemental earnings presentation can be accessed on the company’s website, www.patrickind.com under “For Investors.”
About Patrick Industries, Inc.
Patrick Industries (NASDAQ: PATK) is a leading component solutions provider for the RV, marine, manufactured housing and various industrial markets – including single and multi-family housing, hospitality, institutional and commercial markets. Founded in 1959, Patrick is based in Elkhart, Ind., with approximately 11,000 employees across the United States.