Patrick Industries, Inc. Reports Third Quarter 2023 Financial Results
- Adjusted EBITDA margin increased by 130 basis points to 13.1% in Q3 2023
- Inventory reduction of $150 million from year-end 2022 and $216 million from Q3 2022
- Cash provided by operations for the first nine months of 2023 was $294 million, an increase of $64 million from the same period last year
- Free cash flow through Q3 2023 was $412 million, an increase of 64% compared to the same period in 2022
- Long-term debt decreased by approximately $112 million during Q3 2023
- Net sales decreased by 22% to $866 million in Q3 2023
- Operating income decreased by $22 million to $71 million in Q3 2023
- Net income decreased by 33% to $40 million in Q3 2023
- Diluted earnings per share decreased by 26% to $1.81 in Q3 2023
Third Quarter 2023 Highlights (compared to Third Quarter 2022 unless otherwise noted)
- Net sales of
$866 million 22% as a result of lower wholesale unit shipments in our end markets and lower pricing passed on to our customers to reflect changes in certain commodity costs, partially offset by market share gains. - Diversification strategy, acquisitions, successful labor management and cost control, continuous improvement and automation initiatives resulted in operating margin resilience despite the sales decline, with operating margin declining 10 basis points to
8.2% during the quarter. - Adjusted EBITDA of
$113 million 14% ; adjusted EBITDA margin increased 130 basis points to13.1% . - Inventory reduction of
$150 million $216 million $294 million $230 million - On a trailing twelve-month basis, free cash flow through the third quarter of 2023 was
$412 million 64% compared to$250 million - Strong cash flow and solid balance sheet and liquidity position us favorably and help enable us to continue to opportunistically deploy capital and flex our operations, to reflect current market conditions.
Net sales were
Operating income of
Net income decreased
"Our operating results for the third quarter of 2023 are a reflection of our team's thoughtful discipline to manage our business and drive resilient operating margins in a very dynamic environment, despite the continued reduction in shipments across our end markets," said Andy Nemeth, Chief Executive Officer. "We have reduced our overall cost structure and reduced our inventory by
Jeff Rodino, President, said, "We continue to strategically deploy capital and reinvest in the business with the goal of achieving our long-term growth objectives and operational excellence. This focus is also reflected in our repayment of
Third Quarter 2023 Revenue by Market Sector
(compared to Third Quarter 2022 unless otherwise noted)
RV (
- Revenue of
$400 million 24% while wholesale RV industry unit shipments declined20% . - Content per wholesale RV unit (on a trailing twelve-month basis) decreased
2% to$4,957
Marine (
- Revenue of
$205 million 24% while estimated wholesale powerboat industry unit shipments decreased23% . - Estimated content per wholesale powerboat unit (on a trailing twelve-month basis) increased
3% to$5,009
Housing (
- Revenue of
$261 million 18% ; estimated wholesale MH industry unit shipments decreased22% ; total housing starts decreased6% , with single-family housing starts increasing7% and multifamily housing starts decreasing28% . - Estimated MH content per wholesale MH unit (on a trailing twelve-month basis) increased
8% to$6,498
Balance Sheet, Cash Flow and Capital Allocation
Cash provided by operations of
We remained disciplined in allocating and deploying capital, returning approximately
Our total debt at the end of the third quarter was approximately
Business Outlook and Summary
"We remain confident in our ability to navigate the current macroeconomic environment while continuing to reinvest in our business thanks to our solid balance sheet and liquidity position and our team's dedication to operational excellence and customer service at the highest level," continued Mr. Nemeth. "We believe RV OEM production is calibrated with retail unit shipments as a result of disciplined business management by dealers and OEMs alike resulting in lower dealer inventory relative to historical levels, and a healthier mix of product by model year. As we anticipate a potential recovery in RV production next year, we expect improving industry wholesale shipments to offset the financial impact of continued restricted production from marine OEMs and inventory discipline from dealers. More importantly, long-term demand for the outdoor enthusiast lifestyle is supported by positive demographic trends and consumers' affinity for outdoor living and innovative lifestyle product enhancements. Affordable housing continues to be in short supply and we remain optimistic about the long-term opportunity this presents as home buyers adjust to higher interest rates. We like our position in the markets we serve and are confident that our diverse portfolio and flexible operating model will help continue to enable us to deliver value to our stakeholders."
Conference Call Webcast
Patrick Industries will host an online webcast of its third quarter 2023 earnings conference call that can be accessed on the Company's website, www.patrickind.com, under "For Investors," on Thursday, October 26, 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."
About Patrick Industries, Inc.
Patrick Industries (NASDAQ: PATK) is a leading component solutions provider for the RV, Marine 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 to include 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. 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) | ||||||||
Third Quarter Ended | Nine Months Ended | |||||||
($ in thousands except per share data) | October 1, | September 25, | October 1, | September 25, | ||||
NET SALES | $ 866,073 | $ 1,112,089 | $ 2,686,858 | $ 3,929,957 | ||||
Cost of goods sold | 666,954 | 875,638 | 2,083,527 | 3,071,057 | ||||
GROSS PROFIT | 199,119 | 236,451 | 603,331 | 858,900 | ||||
Operating Expenses: | ||||||||
Warehouse and delivery | 37,664 | 39,997 | 109,540 | 125,213 | ||||
Selling, general and administrative | 70,873 | 84,924 | 231,814 | 250,969 | ||||
Amortization of intangible assets | 19,507 | 18,769 | 59,093 | 54,175 | ||||
Total operating expenses | 128,044 | 143,690 | 400,447 | 430,357 | ||||
OPERATING INCOME | 71,075 | 92,761 | 202,884 | 428,543 | ||||
Interest expense, net | 16,879 | 15,302 | 53,623 | 44,990 | ||||
Income before income taxes | 54,196 | 77,459 | 149,261 | 383,553 | ||||
Income taxes | 14,646 | 18,640 | 37,181 | 95,537 | ||||
NET INCOME | $ 39,550 | $ 58,819 | $ 112,080 | $ 288,016 | ||||
BASIC EARNINGS PER COMMON | $ 1.84 | $ 2.66 | $ 5.20 | $ 12.93 | ||||
DILUTED EARNINGS PER COMMON | $ 1.81 | $ 2.43 | $ 5.09 | $ 11.78 | ||||
Weighted average shares outstanding - | 21,511 | 22,087 | 21,541 | 22,274 | ||||
Weighted average shares outstanding - | 21,884 | 24,413 | 22,063 | 24,573 | ||||
PATRICK INDUSTRIES, INC. | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | ||||
As of | ||||
($ in thousands) | October 1, 2023 | December 31, 2022 | ||
ASSETS | ||||
Current Assets | ||||
Cash and cash equivalents | $ 16,450 | $ 22,847 | ||
Trade receivables, net | 240,850 | 172,890 | ||
Inventories | 517,657 | 667,841 | ||
Prepaid expenses and other | 36,296 | 46,326 | ||
Total current assets | 811,253 | 909,904 | ||
Property, plant and equipment, net | 358,266 | 350,572 | ||
Operating lease right-of-use assets | 170,128 | 163,674 | ||
Goodwill and intangible assets, net | 1,308,156 | 1,349,493 | ||
Other non-current assets | 8,140 | 8,828 | ||
TOTAL ASSETS | $ 2,655,943 | $ 2,782,471 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Current Liabilities | ||||
Current maturities of long-term debt | $ 7,500 | $ 7,500 | ||
Current operating lease liabilities | 47,262 | 44,235 | ||
Accounts payable | 148,239 | 142,910 | ||
Accrued liabilities | 132,813 | 172,595 | ||
Total current liabilities | 335,814 | 367,240 | ||
Long-term debt, less current maturities, net | 1,104,618 | 1,276,149 | ||
Long-term operating lease liabilities | 126,231 | 122,471 | ||
Deferred tax liabilities, net | 47,390 | 48,392 | ||
Other long-term liabilities | 10,587 | 13,050 | ||
TOTAL LIABILITIES | 1,624,640 | 1,827,302 | ||
TOTAL SHAREHOLDERS' EQUITY | 1,031,303 | 955,169 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 2,655,943 | $ 2,782,471 | ||
PATRICK INDUSTRIES, INC. | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | ||||
Nine Months Ended | ||||
($ in thousands) | ||||
October 1, 2023 | September 25, 2022 | |||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||
Net income | $ 112,080 | $ 288,016 | ||
Depreciation and amortization | 107,976 | 96,256 | ||
Stock-based compensation expense | 13,675 | 15,596 | ||
Amortization of convertible notes debt discount | 823 | 1,399 | ||
Other adjustments to reconcile net income to net cash | 3,201 | (664) | ||
Change in operating assets and liabilities, net of acquisitions | 56,075 | (170,795) | ||
Net cash provided by operating activities | 293,830 | 229,808 | ||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||
Purchases of property, plant and equipment | (47,430) | (63,437) | ||
Business acquisitions and other investing activities | (28,033) | (145,447) | ||
Net cash used in investing activities | (75,463) | (208,884) | ||
NET CASH FLOWS USED IN FINANCING ACTIVITIES | (224,764) | (90,504) | ||
Decrease in cash and cash equivalents | (6,397) | (69,580) | ||
Cash and cash equivalents at beginning of year | 22,847 | 122,849 | ||
Cash and cash equivalents at end of period | $ 16,450 | $ 53,269 | ||
PATRICK INDUSTRIES, INC.
Earnings Per Common Share
The table below illustrates the calculation for diluted share count which shows the dilutive impact of the adoption of ASU 2020-06 on our
Third Quarter Ended | Nine Months Ended | |||||||
($ in thousands except per share data) | October 1, | September 25, | October 1, | September 25, | ||||
Numerator: | ||||||||
Earnings for basic earnings per | $ 39,550 | $ 58,819 | $ 112,080 | $ 288,016 | ||||
Effect of interest on potentially | — | 478 | 162 | 1,417 | ||||
Earnings for diluted earnings per | $ 39,550 | $ 59,297 | $ 112,242 | $ 289,433 | ||||
Denominator: | ||||||||
Weighted average common shares | 21,511 | 22,087 | 21,541 | 22,274 | ||||
Weighted average impact of | — | 2,064 | 221 | 2,053 | ||||
Weighted average impact of | 373 | 262 | 301 | 246 | ||||
Weighted average common shares | 21,884 | 24,413 | 22,063 | 24,573 | ||||
Earnings per common share: | ||||||||
Basic earnings per common share | $ 1.84 | $ 2.66 | $ 5.20 | $ 12.93 | ||||
Diluted earnings per common | $ 1.81 | $ 2.43 | $ 5.09 | $ 11.78 | ||||
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:
Third Quarter Ended | Nine Months Ended | |||||||
($ in thousands) | October 1, | September 25, | October 1, | September 25, | ||||
Net income | $ 39,550 | $ 58,819 | $ 112,080 | $ 288,016 | ||||
+ Depreciation & amortization | 36,484 | 33,281 | 107,976 | 96,256 | ||||
+ Interest expense, net | 16,879 | 15,302 | 53,623 | 44,990 | ||||
+ Income taxes | 14,646 | 18,640 | 37,181 | 95,537 | ||||
EBITDA | 107,559 | 126,042 | 310,860 | 524,799 | ||||
+ Stock-based compensation | 5,729 | 5,352 | 13,675 | 15,596 | ||||
+ Loss (Gain) on sale of property, plant | 142 | (165) | 242 | (5,713) | ||||
Adjusted EBITDA | $ 113,430 | $ 131,229 | $ 324,777 | $ 534,682 | ||||
The following table reconciles cash flow from operations to free cash flow on a trailing twelve-month basis:
Trailing Twelve Months Ended | ||||
($ in thousands) | October 1, 2023 | September 25, 2022 | ||
Cash flow from operations | $ 475,760 | $ 334,521 | ||
Less: purchases of property, plant and equipment | (63,876) | (84,086) | ||
Free cash flow | $ 411,884 | $ 250,435 | ||
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SOURCE Patrick Industries, Inc.
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