ELKHART, Ind., – Patrick Industries, Inc. (NASDAQ: PATK), a leading component solutions provider for the leisure lifestyle and lousing markets today reported financial results for the first quarter ended April 2.
First Quarter 2023 Highlights (compared to First Quarter 2022 unless otherwise noted)
- Net sales of $900 million decreased 33%, as 25% growth in our marine end-market sales partially offset the impact of a 54% reduction in RV industry wholesale shipments on our RV sales
- Gross profit of $194 million decreased 34%, gross margin decreased 40 basis points to 21.6%
- Operating income of $56 million decreased 65%, operating margin decreased 590 basis points to 6.2%
- Net income of $30 million decreased 73%
- Diluted earnings per share of $1.35 decreased 70%
- Adjusted EBITDA of $97 million decreased 49%, adjusted EBITDA margin decreased 350 basis points to 10.8%
- Cash used in operations of $1 million improved compared to cash used in operations of $23 million
- On a trailing twelve-month basis, free cash flow through the first quarter of 2023 was $352 million, an increase of 222% compared to $110 million through the first quarter of 2022
- Returned $15 million to shareholders in the quarter, including $4 million through common share purchases and $11 million through dividends
Net sales in the first quarter of 2023 were $900 million, a decrease of $442 million, or 33%, from $1.34 billion in the first quarter of 2022, as our end-market diversification strategy partially mitigated the effects of significant declines in the RV market and macroeconomic headwinds. The strength in our marine business, market share gains, and the contribution of acquisitions completed in 2022 partially offset a $454 million decline in RV revenues in the quarter resulting from the continued reduction of production by our RV OEM customers in alignment with decreased retail sales. In addition, revenue from our housing end market, which consists of our manufactured housing and industrial end markets, declined $43 million due to industry headwinds from elevated interest rates, persistent inflation and decreased housing affordability, particularly in the single-family market.
Operating income of $56 million in the first quarter of 2023 decreased $106 million from $162 million in the first quarter of 2022, and operating margin of 6.2% in the first quarter of 2023 decreased 590 basis points compared to 12.1% in the same period a year ago. The decline in operating margin was driven principally by the impact of reduced RV OEM production, coupled with increased fixed non-cash amortization expense related to acquisitions and our investments in human capital and continued IT transformation initiatives. The operating margin reduction was partially offset by the continued realization of efficiencies related to automation investments. Additionally, operating income in the first quarter of 2022 includes a $5.5 million pre-tax gain on sale of property.
Net income decreased 73% to $30 million, from $113 million in the first quarter of 2022. Diluted earnings per share of $1.35 decreased 70% compared to $4.54 for the first quarter of 2022.
“Our first quarter performance continues to demonstrate the strength of our strategic diversification and the resilience of our overall business model as we generated solid first quarter profitability despite a slowing economy and a 54% reduction in RV wholesale unit shipments,” said Andy Nemeth, Chief Executive Officer. “We continued to focus on capital allocation and growth strategies, including growing our organic market share while positioning Patrick to remain a leading component solutions provider to our customers. Our team remains dedicated to exceeding customer expectations through our expanding array of higher value products with a keen focus on quality and customer service, profitable growth, and driving shareholder value.”
Jeff Rodino, President, said, “We are continuing to flex our business model in this uncertain macroeconomic and business environment with a strategic long-term focus on further solidifying our infrastructure by continuing to leverage the strength of our cash flows and make meaningful investments in automation and production efficiencies, flexible capacity, and human capital. These investments will help us weather the current headwinds we face and perhaps more importantly, provide a solid foundation to grow our market share and execute on attractive acquisition opportunities as we look to be BETTER Together with our customers, team members, shareholders, and communities.”
First Quarter 2023 Revenue by Market Sector
(compared to First Quarter 2022 unless otherwise noted)
RV (41% of Revenue)
- Revenue of $367 million decreased 55%, in line with the decrease in wholesale RV industry unit shipments of 54%.
- Content per wholesale RV unit (on a trailing twelve-month basis) increased 22% to $5,349.
Marine (31% of Revenue)
- Revenue of $276 million increased 25% while estimated wholesale powerboat industry unit shipments increased 14%.
- Estimated content per wholesale powerboat unit (on a trailing twelve-month basis) increased 27% to $5,266.
Housing (28% of Revenue, comprising both MH and Industrial)
- Revenue of $257 million decreased 14%; estimated wholesale MH industry unit shipments decreased 28%; total housing starts decreased 18%, with single-family housing starts decreasing 29% while multifamily housing starts increased 5%.
- Estimated MH content per wholesale MH unit (on a trailing twelve-month basis) increased 16% to $6,353.
Balance Sheet, Cash Flow and Capital Allocation
Cash used in operations of $1 million improved compared to cash used in operations of $23 million in the first quarter of 2022 due to lower working capital investment offset by the reduction in net income. Purchases of property, plant and equipment totaled $20 million in the first quarter of 2023, reflecting continued investments in infrastructure, software, and automation initiatives to better align resources for increased scalability, flexibility and efficiency. On a trailing twelve-month basis, free cash flow (defined as cash flow from operations less purchases of property, plant and equipment) through the first quarter of 2023 was $352 million, an increase of 222% compared to $110 million through the first quarter of 2022. Our long-term debt increased $55 million during the first quarter of 2023, reflecting net borrowings on our revolving credit facility totaling $230 million primarily to fund the planned repayment of our $172.5 million 1.00% Convertible Senior Notes at maturity in February 2023.
In alignment with our capital allocation strategy, we returned approximately $15 million to shareholders in the first quarter of 2023, consisting of $4 million of opportunistic repurchases of approximately 54,600 common shares and $11 million of dividends.
Our total debt at the end of the first quarter was approximately $1.35 billion, resulting in a total net leverage ratio of 2.3x (as calculated in accordance with our credit agreement). Available net liquidity, comprised of borrowing availability under our credit facility and cash on hand, was approximately $489 million.
Business Outlook and Summary
“We remain optimistic about the long-term outlook for all our end markets and believe we are well positioned to not only take advantage of strategic opportunities that present themselves in the short term, but to also pivot and drive utilization and capitalize on opportunities that arise when our markets stabilize and rebound,” said Mr. Nemeth. “We understand the headwinds we face as elevated interest rates, inflation, and macroeconomic uncertainty have weighed on our end markets. We are confident in the strength of our balance sheet, liquidity and our favorable long-term capital structure with no material debt maturities until 2027. Our strong operating platform and diversified business model with less reliance on a single end market has improved our financial resilience and helped to ensure greater stability despite the dynamics of the current business backdrop.”
Conference Call Webcast
Patrick Industries will host an online webcast of its first quarter 2023 earnings conference call that can be accessed on the Company’s website, www.patrickind.com, under “For Investors,” on Thursday, April 27, 2023 at 10:00 a.m. Eastern Time. In addition, a supplemental earnings presentation can be accessed on the Company’s website, www.patrickind.com under “For Investors.”