Patrick Industries Q2 Earnings Call Highlights

Key Points

• Second-quarter sales were broadly stable at $1.04 billion, but adjusted EPS fell to $1.29 from $1.50 and adjusted EBITDA declined to $126 million. RV revenue dropped 15%, while marine, powersports and housing posted double-digit or modest growth that offset much of the weakness.
• Patrick lowered its 2026 RV outlook and expects adjusted operating margin to be flat year over year, with affordability programs potentially creating an additional 20-basis-point pressure. The company projects $320 million–$350 million in operating cash flow and about $250 million in free cash flow for 2026.
• The company repurchased roughly 980,000 shares for $91 million during the quarter, but further buybacks are generally restricted pending its planned all-stock merger with Lippert. The combination, targeted for the first half of 2027, is expected to generate approximately $150 million in annual run-rate cost synergies.

Patrick Industries NASDAQ: PATK reported second-quarter net sales of $1.04 billion, down less than 1% from a year earlier, as growth in marine, powersports and housing largely offset a decline in recreational vehicle revenue tied to lower industry shipments.

Adjusted earnings were $1.29 per diluted share, including approximately $0.07 of dilution from convertible notes and related warrants, compared with $1.50 per diluted share in the prior-year period. Net income rose 34% to $43 million, or $1.28 per diluted share, while adjusted EBITDA declined to $126 million from $135 million.

Chief Executive Officer Andy Nemeth said the results reflected the company’s diversification strategy. While RV and marine wholesale unit shipments remain more than 20% below 2019 levels, Patrick’s trailing 12-month sales have increased nearly 70% and adjusted earnings per share have risen more than 60%, he said.

RV weakness offset by other end markets

RV revenue fell 15% year over year to $407 million, accounting for 39% of consolidated revenue. The decline tracked a 16% reduction in RV industry wholesale shipments, or roughly 15,300 fewer units, during the quarter.

President Jeff Rodino said RV retail demand was softer than expected, with macroeconomic and geopolitical conditions continuing to affect consumer purchasing decisions. Patrick estimated second-quarter RV retail shipments declined 12% to approximately 99,200 units, compared with wholesale shipments of about 77,600 units.

That gap implied a seasonal dealer inventory reduction of about 21,600 units. Estimated RV dealer inventory was 18 to 20 weeks on hand at quarter-end, below 20 to 22 weeks at the end of the first quarter and below pre-pandemic averages of 26 to 30 weeks.

Despite the shipment decline, Patrick estimated trailing-12-month RV content per unit increased 7% to $5,303. Quarterly content per unit rose 2% year over year.

Marine revenue increased 22% to $191 million, representing 18% of sales, despite Patrick’s estimate that marine wholesale powerboat shipments were flat year over year. Trailing-12-month marine content per wholesale powerboat unit rose 22% to an estimated $4,883, with the company saying most of that growth was organic.

Nemeth attributed marine gains to the company’s expanded solutions offerings, including tower and windshield products, electrical systems, digital systems, SeaDek flooring and fuel tanks. He said Patrick’s exposure to mid- and higher-end boat categories has also been relatively resilient.

Powersports revenue rose 28% to $123 million, or 12% of total sales. Rodino said growth was driven by demand for utility-focused units, as well as continued OEM adoption of cabin closures and other premium utility-vehicle content supplied by Sportech.

Housing revenue increased 2% to $320 million, supported by industrial products including laminated panels sold to big-box stores. That growth offset an estimated 8% decline in manufactured-housing wholesale shipments. Manufactured housing represented 55% of housing revenue in the quarter.

Margins, cash flow and capital returns

Gross margin was 23.8%, essentially unchanged from 23.9% a year earlier. Adjusted operating margin declined to 7.5% from 8.3%, reflecting the drop in RV wholesale shipments and higher oil and fuel prices, Chief Financial Officer Matt Filer said.

The company estimated that second-quarter revenue changes included 7% organic growth, 1% acquisition growth and a 9% decline attributable to industry conditions.

Cash provided by operations was $69 million for the first six months of 2026, compared with $189 million a year earlier. Filer said the decline reflected working-capital investment, including elevated inventory intended to support Patrick’s composite-products strategy and customer programs designed to mitigate pricing pressures and tariffs.

Patrick expects improved adoption of composite products in the second half of the year and expects working capital to become a source of cash generation, Nemeth said during the question-and-answer session.

• Available liquidity totaled approximately $691 million at quarter-end.
• Net leverage was 3.0 times, following inventory investment and increased share repurchases.
• The company repurchased approximately 980,000 shares for $91 million during the quarter.
• Total shareholder returns during the quarter were approximately $106 million, including $15 million in dividends.
• About $62 million remained under the company’s existing repurchase authorization at quarter-end.

Filer said Patrick is generally restricted from further share repurchases before the completion of its merger agreement due to customary interim operating covenants.

Updated outlook and affordability programs

Patrick lowered its 2026 RV outlook, now expecting retail demand to decline by low double digits and wholesale shipments to range from 285,000 to 300,000 units. The company expects second-half RV production run rates to be below those in the first half, management said.

For marine, Patrick continues to expect retail shipments to be flat to down slightly and wholesale shipments to rise by low single digits. It expects powersports unit shipments and organic content to increase by low single digits, resulting in a mid- to high-single-digit increase for Patrick’s powersports business. The company still expects manufactured-housing wholesale shipments and total housing starts to decline by low- to mid-single digits.

Based on revised end-market forecasts, Patrick now expects 2026 adjusted operating margin to be flat with 2025. However, Filer said the company is pursuing incremental volume-based programs with customers during the second half to address affordability, which could reduce margins by an additional 20 basis points compared with 2025.

Nemeth said the programs are intended to provide lower-cost product alternatives and share the benefits of Patrick’s purchasing scale and production flexibility with customers. He said additional volume could partially offset margin pressure through greater absorption of fixed costs.

The company expects 2026 operating cash flow of $320 million to $350 million, capital expenditures of $70 million to $80 million, and free cash flow of approximately $250 million. It continues to project an effective tax rate of 24% to 25%.

Technology investments and planned Lippert combination

Patrick highlighted new investments in automation, analytics and AI-enabled tools. The company conducted an internal AI process competition among corporate administrative teams and is using AI in its aftermarket platform for product introductions and digital content generation. Sportech has also activated AI-enabled camera systems for quality control and inspection processes, Rodino said.

The company is also launching advanced digital printing technology at its North American Forest Products campus. Rodino said the technology can apply graphics and textures directly to a broader range of substrates, including composite materials, potentially improving design flexibility, manufacturing efficiency and quality compared with traditional laminated vinyl or paper products.

Management also discussed its previously announced all-stock merger agreement with LCI Industries, also known as Lippert. The transaction is targeted to close in the first half of 2027, subject to shareholder and regulatory approvals.

Patrick expects the combination to generate approximately $150 million of net annual run-rate cost synergies. Until the transaction closes, Nemeth said, the companies will remain independent and Patrick will continue operating as a standalone business.

About Patrick Industries (NASDAQ:PATK)

Patrick Industries, Inc is a leading manufacturer and distributor of component products and building materials for the recreational vehicle (RV), manufactured housing, marine and industrial markets. The company supplies a broad array of interior and exterior products, including cabinetry, countertops, flooring, wall panels and decorative trim. Patrick Industries also offers engineered composites, adhesives, sealants and insulation solutions that cater to both original equipment manufacturers (OEMs) and aftermarket customers across North America.

Founded in 1959 and headquartered in Elkhart, Indiana, Patrick Industries began as a small distributor of hardwood and millwork products.

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