Patrick Industries, Inc. Reports Fourth Quarter and Full Year 2023 Financial Results and Declares Quarterly Cash Dividend
- Full year 2023 operating margin of 7.5%
- Reduced inventory by $158 million
- Strong free cash flows through disciplined cost control
- Acquisition of Sportech, LLC for future growth
- Decrease in net sales by 18% in the fourth quarter of 2023
- Decline in revenue due to lower OEM wholesale unit shipments across end markets
- Net income decrease of 56% in 2023 compared to 2022
- Adjusted EBITDA for full year 2023 decreased by 34%
Insights
The reported decrease in net sales and earnings per share (EPS) for Patrick Industries is a key financial metric that may influence investor sentiment. The 18% drop in net sales and the 16% decrease in EPS year-over-year suggest a significant downturn in the company's performance. The reduction in OEM wholesale unit shipments and lower pricing due to commodity cost changes are indicative of broader economic challenges, potentially including decreased consumer demand and cost pressures. The company's ability to improve operating margin despite these headwinds, through cost control and automation initiatives, is a positive sign of operational efficiency. However, the marine sector's higher fixed cost profile and the decline in marine wholesale shipment run rates could continue to pressure margins in the short term.
The inventory reduction and debt repayment strategies are notable as they improve the company's liquidity and reduce financial risk. The full year free cash flow increase of 5% is a positive indicator of the company's cash generation ability, which is crucial for sustaining operations and pursuing strategic opportunities. Investors may view the acquisition of Sportech as a potential growth driver, but the impact on the company's financials will need to be closely monitored, especially considering the $315 million price tag and the funding through increased borrowings.
Patrick Industries' performance must be contextualized within the broader trends affecting the Outdoor Enthusiast and Housing markets. The reported 10-year lows in RV wholesale unit shipments and the nearly 30% decline in marine wholesale shipment run rates in the latter half of 2023 are reflective of cyclical pressures and perhaps shifts in consumer spending. The company's strategic diversification, including the acquisition of Sportech, could mitigate some of these sector-specific risks by expanding into new market segments. However, the long-term success of these initiatives will depend on the company's ability to integrate the acquisition effectively and capitalize on synergies.
The increase in full year MH content per wholesale MH unit and the rise in single-family housing starts are bright spots that may signal opportunities for growth in the housing sector. However, the overall decrease in new housing starts, attributed to inflation and interest rate hikes, could dampen the prospects for this segment. Understanding these market dynamics is crucial for stakeholders to assess the company's future performance and strategic positioning.
The economic environment, characterized by inflation and rising interest rates, has a direct bearing on Patrick Industries' business performance. These macroeconomic factors have likely contributed to the softening demand in the company's end markets, as seen by the decline in wholesale unit shipments and new housing starts. The company's efforts to reduce inventory and manage working capital are prudent in this context, as they help maintain financial flexibility.
Looking ahead, the company's optimism for a recovery in end markets, especially RVs, suggests an expectation of an improving economic landscape or a belief in the resilience of the Outdoor Enthusiast market. The acquisition of Sportech could be a strategic hedge against potential downturns in other segments, but it also adds debt to the company's balance sheet. The interplay between economic recovery, consumer confidence and interest rates will be critical in determining the trajectory of Patrick Industries' growth and profitability.
Fourth Quarter and Full Year 2023 Highlights (compared to Fourth Quarter 2022 unless otherwise noted)
- Fourth quarter net sales of
$781 million 18% as a result of lower OEM wholesale unit shipments in our end markets and lower pricing passed on to our customers to reflect changes in certain commodity costs. - Fourth quarter and full year 2023 diluted earnings per share (EPS) was
$1.41 $6.50 $0.08 $0.21 - Operating margin for the fourth quarter improved 20 basis points to
7.3% , reflecting the continued benefits of our diversification strategy, successful labor management and cost control, and continuous improvement and automation initiatives. - Achieved full year 2023 operating margin of
7.5% . - Fourth quarter adjusted EBITDA of
$100 million 8% , while fourth quarter adjusted EBITDA margin increased 140 basis points to12.8% ; full year 2023 adjusted EBITDA of$425 million 34% , while full year 2023 adjusted EBITDA margin decreased 100 basis points to12.2% . - Inventory reduction of
$158 million - Cash provided by operations for full year 2023 was
$409 million $412 million $350 million 5% compared to$332 million - Repaid
$260 million $780 million $61 million - Completed the acquisition of Sportech, LLC in January 2024, representing our largest acquisition to date.
Fourth quarter net sales decreased
Operating income of
Net income was
"I am extremely proud of our team's achievements throughout 2023 as they relentlessly focused on driving and delivering strong results in the face of challenging market conditions, with an unwavering commitment to our goal to be the supplier of choice to OEMs in the Outdoor Enthusiast and Housing markets," said Andy Nemeth, Chief Executive Officer. "Our team performed impressively, despite RV wholesale unit shipments hitting 10-year lows in 2023 and emerging marine headwinds that resulted in an almost
Jeff Rodino, President – RV, said, "We have continued to invest in our platform to ensure we remain focused on our goal of delivering the highest quality and service while actively listening to the voice of the customer. The recent creation of our Advanced Products Evolution Group, our continued investments in automation, AI, robotic learning, IT, and software solutions, represent our commitment to continuously improve our customer focused model, as well as our financial and structural processes, further enabling us to drive long-term benefits that support future growth."
Fourth Quarter 2023 Revenue by Market Sector
(compared to Fourth Quarter 2022 unless otherwise noted)
RV (
- Revenue of
$353 million 14% while wholesale RV industry unit shipments decreased3% - Full year content per wholesale RV unit decreased
9% to$4,800
Marine (
- Revenue of
$174 million 32% while estimated wholesale powerboat industry unit shipments decreased24% - Full year estimated content per wholesale powerboat unit decreased
5% to$4,803
Housing (
- Revenue of
$254 million 11% ; wholesale MH industry unit shipments decreased2% ; total housing starts increased2% , with single-family housing starts increasing22% and multifamily housing starts decreasing27% - Full year MH content per wholesale MH unit increased
2% to$6,372
Full Year 2023 Results
Net sales of
Operating income of
Balance Sheet, Cash Flow and Capital Allocation
Cash provided by operations for the full year 2023 was
In alignment with our capital allocation strategy, we returned
We repaid long-term debt of approximately
Business Outlook and Summary
"In the face of a challenging environment, our team members demonstrated our BETTER Together values, prioritizing improving our customer service, meeting our customers' needs and managing in alignment with their dynamic production schedules while also focusing on our financial strength through initiatives including debt reduction, prudent working capital and cost management, and realized operational efficiencies," continued Mr. Nemeth. "We are confident in the long-term growth potential of our business and remain optimistic that we will begin to see improvement in our end markets this year, starting with the RV market. Our recent acquisition of Sportech, with a focus on the attractive utility and premium off-road vehicle segment of the Powersports market, provides us with another solid platform for future organic and strategic growth. Sportech enables us to further accelerate our momentum within the attractive Outdoor Enthusiast space, and we continue to see the potential to expand our total addressable market, furthering our strategic diversification. Looking ahead to 2024 with our strong capital structure and liquidity position, nimble business model, and focus on delivering the highest level of customer service, we remain ready to flex our business both for challenges and opportunities and drive profitable long-term growth."
Quarterly Cash Dividend
On February 5, 2024, the Company's Board of Directors declared a quarterly cash dividend of
Conference Call Webcast
As previously announced, Patrick Industries will host an online webcast of its fourth quarter 2023 earnings conference call that can be accessed on the Company's website, www.patrickind.com, under "For Investors," on Thursday, February 8, 2024 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."
About Patrick Industries, Inc.
Patrick Industries (NASDAQ: PATK) is a leading component solutions provider for the RV, Marine, Powersports and Housing markets. Founded in 1959, Patrick is based in
Cautionary Statement Regarding Forward-Looking Statements
This press release contains certain statements related to future results, our intentions, beliefs and expectations or predictions for the future, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: the effects of external macroeconomic factors, including adverse developments in world financial markets, disruptions related to tariffs and other trade issues, and global supply chain interruptions; adverse economic and business conditions, including inflationary pressures, cyclicality and seasonality in the industries we sell our products; the effects of interest rate changes and other monetary and market fluctuations; the deterioration of the financial condition of our customers or suppliers; the ability to adjust our production schedules up or down quickly in response to rapid changes in demand; the loss of a significant customer; changes in consumer preferences; pricing pressures due to competition; conditions in the credit market limiting the ability of consumers and wholesale customers to obtain retail and wholesale financing for RVs, manufactured homes, and marine products; public health emergencies or pandemics, such as the COVID-19 pandemic; the imposition of, or changes in, restrictions and taxes on imports of raw materials and components used in our products; information technology performance and security, including our ability to deter cyberattacks or other information security incidents; any increased cost or limited availability of certain raw materials; the impact of governmental and environmental regulations, and our inability to comply with them; our level of indebtedness; the ability to remain in compliance with our credit agreement covenants; the availability and costs of labor and production facilities and the impact of labor shortages; inventory levels of retailers and manufacturers; the ability to manage working capital, including inventory and inventory obsolescence; the ability to generate cash flow or obtain financing to fund growth; future growth rates in the Company's core businesses; realization and impact of efficiency improvements and cost reductions; the successful integration of acquisitions and other growth initiatives; increases in interest rates and oil and gasoline prices; the ability to retain key executive and management personnel; the impact on our business resulting from wars and military conflicts such as war in
There can be no assurance that any forward-looking statement will be realized or that actual results will not be significantly different from that set forth in such forward-looking statement. Information about certain risks that could affect our business and cause actual results to differ from those expressed or implied in the forward-looking statements are contained in the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, and in the Company's Forms 10-Q for subsequent quarterly periods, which are filed with the Securities and Exchange Commission ("SEC") and are available on the SEC's website at www.sec.gov. In addition, future dividends are subject to Board approval. Each forward-looking statement speaks only as of the date of this press release, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date on which it is made.
PATRICK INDUSTRIES, INC. | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | |||||||
Fourth Quarter Ended December 31 | Year Ended December 31 | ||||||
($ in thousands, except per share data) | 2023 | 2022 | 2023 | 2022 | |||
NET SALES | $ 781,187 | $ 951,915 | $ 3,468,045 | $ 4,881,872 | |||
Cost of goods sold | 602,285 | 750,877 | 2,685,812 | 3,821,934 | |||
GROSS PROFIT | 178,902 | 201,038 | 782,233 | 1,059,938 | |||
Operating Expenses: | |||||||
Warehouse and delivery | 34,381 | 37,813 | 143,921 | 163,026 | |||
Selling, general and administrative | 67,604 | 76,544 | 299,418 | 327,513 | |||
Amortization of intangible assets | 19,601 | 19,054 | 78,694 | 73,229 | |||
Total operating expenses | 121,586 | 133,411 | 522,033 | 563,768 | |||
OPERATING INCOME | 57,316 | 67,627 | 260,200 | 496,170 | |||
Interest expense, net | 15,319 | 15,770 | 68,942 | 60,760 | |||
Income before income taxes | 41,997 | 51,857 | 191,258 | 435,410 | |||
Income taxes | 11,180 | 11,677 | 48,361 | 107,214 | |||
NET INCOME | $ 30,817 | $ 40,180 | $ 142,897 | $ 328,196 | |||
BASIC EARNINGS PER COMMON SHARE | $ 1.44 | $ 1.85 | $ 6.64 | $ 14.82 | |||
DILUTED EARNINGS PER COMMON SHARE | $ 1.41 | $ 1.68 | $ 6.50 | $ 13.49 | |||
Weighted average shares outstanding - Basic | 21,451 | 21,771 | 21,519 | 22,140 | |||
Weighted average shares outstanding - Diluted | 21,914 | 24,191 | 22,025 | 24,471 | |||
PATRICK INDUSTRIES, INC. | |||
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | |||
As of December 31 | |||
($ in thousands) | 2023 | 2022 | |
ASSETS | |||
Current Assets | |||
Cash and cash equivalents | $ 11,409 | $ 22,847 | |
Trade receivables, net | 163,838 | 172,890 | |
Inventories | 510,133 | 667,841 | |
Prepaid expenses and other | 49,251 | 46,326 | |
Total current assets | 734,631 | 909,904 | |
Property, plant and equipment, net | 353,625 | 350,572 | |
Operating lease right-of-use assets | 177,717 | 163,674 | |
Goodwill and intangible assets, net | 1,288,546 | 1,349,493 | |
Other non-current assets | 7,929 | 8,828 | |
TOTAL ASSETS | $ 2,562,448 | $ 2,782,471 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | |||
Current Liabilities | |||
Current maturities of long-term debt | $ 7,500 | $ 7,500 | |
Current operating lease liabilities | 48,761 | 44,235 | |
Accounts payable | 140,524 | 142,910 | |
Accrued liabilities | 111,711 | 172,595 | |
Total current liabilities | 308,496 | 367,240 | |
Long-term debt, less current maturities, net | 1,018,356 | 1,276,149 | |
Long-term operating lease liabilities | 132,444 | 122,471 | |
Deferred tax liabilities, net | 46,724 | 48,392 | |
Other long-term liabilities | 11,091 | 13,050 | |
TOTAL LIABILITIES | 1,517,111 | 1,827,302 | |
TOTAL SHAREHOLDERS' EQUITY | $ 1,045,337 | $ 955,169 | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 2,562,448 | $ 2,782,471 | |
PATRICK INDUSTRIES, INC. | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | |||
Year Ended December 31 | |||
($ in thousands) | 2023 | 2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Net income | $ 142,897 | $ 328,196 | |
Depreciation and amortization | 144,543 | 130,757 | |
Amortization of convertible notes debt discount | 1,072 | 1,851 | |
Stock-based compensation expense | 19,429 | 21,751 | |
Other adjustments to reconcile net income to net cash provided by operating activities | 1,836 | (10,124) | |
Change in operating assets and liabilities, net of acquisitions of businesses | 98,895 | (60,693) | |
Net cash provided by operating activities | 408,672 | 411,738 | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Capital expenditures | (58,987) | (79,883) | |
Business acquisitions and other investing activities | (27,558) | (241,584) | |
Net cash used in investing activities | (86,545) | (321,467) | |
NET CASH FLOWS USED IN FINANCING ACTIVITIES | (333,565) | (190,273) | |
Decrease in cash and cash equivalents | (11,438) | (100,002) | |
Cash and cash equivalents at beginning of year | 22,847 | 122,849 | |
Cash and cash equivalents at end of year | $ 11,409 | $ 22,847 | |
PATRICK INDUSTRIES, INC.
Earnings Per Common Share (Unaudited)
The table below illustrates the calculation for diluted share count which shows the dilutive impact of the adoption of ASU 2020-06 on our
Fourth Quarter Ended December 31 | Year Ended December 31 | |||||||
($ in thousands, except per share data) | 2023 | 2022 | 2023 | 2022 | ||||
Numerator: | ||||||||
Earnings for basic per share calculation | $ 30,817 | $ 40,180 | $ 142,897 | $ 328,196 | ||||
Effect of interest on potentially dilutive convertible notes, net of tax | — | 510 | 162 | 1,927 | ||||
Earnings for dilutive per share calculation | $ 30,817 | $ 40,690 | $ 143,059 | $ 330,123 | ||||
Denominator: | ||||||||
Weighted average common shares outstanding - basic | 21,451 | 21,771 | 21,519 | 22,140 | ||||
Weighted average impact of potentially dilutive convertible notes | — | 2,078 | 166 | 2,059 | ||||
Weighted average impact of potentially dilutive securities | 463 | 342 | 340 | 272 | ||||
Weighted average common shares outstanding - diluted | 21,914 | 24,191 | 22,025 | 24,471 | ||||
Earnings per common share: | ||||||||
Basic earnings per common share | $ 1.44 | $ 1.85 | $ 6.64 | $ 14.82 | ||||
Diluted earnings per common share | $ 1.41 | $ 1.68 | $ 6.50 | $ 13.49 | ||||
PATRICK INDUSTRIES, INC.
Non-GAAP Reconciliation (Unaudited)
Use of Non-GAAP Financial Metrics
In addition to reporting financial results in accordance with
The following table reconciles net income to EBITDA and Adjusted EBITDA:
Fourth Quarter Ended December 31 | Year Ended December 31 | |||||||
($ in thousands) | 2023 | 2022 | 2023 | 2022 | ||||
Net income | $ 30,817 | $ 40,180 | $ 142,897 | $ 328,196 | ||||
+ Depreciation & amortization | 36,567 | 34,501 | 144,543 | 130,757 | ||||
+ Interest expense, net | 15,319 | 15,770 | 68,942 | 60,760 | ||||
+ Income taxes | 11,180 | 11,677 | 48,361 | 107,214 | ||||
EBITDA | 93,883 | 102,128 | 404,743 | 626,927 | ||||
+ Stock based compensation | 5,754 | 6,155 | 19,429 | 21,751 | ||||
+ (Gain) loss on sale of property, plant and equipment | 343 | 153 | 585 | (5,560) | ||||
Adjusted EBITDA | $ 99,980 | $ 108,436 | $ 424,757 | $ 643,118 | ||||
The following table reconciles full year cash flow from operations to free cash flow:
Year Ended December 31 | ||||
($ in thousands) | 2023 | 2022 | ||
Cash flow from operations | $ 408,672 | $ 411,738 | ||
Less: purchases of property, plant and equipment | (58,987) | (79,883) | ||
Free cash flow | $ 349,685 | $ 331,855 | ||
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SOURCE Patrick Industries, Inc.
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