Good morning, ladies and gentlemen, and welcome to Patrick Industries Fourth Quarter 2025 Earnings Conference Call. My name is Julian, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the call over to Mr. Steve O'Hara, Vice President of Investor Relations. Mr. O'Hara, you may begin. Good morning, everyone, and welcome to our call this morning.

I am joined on the call today by Andy Nemeth, CEO; Jeff Rodino, President; and Matt Feiler, SVP Finance and Chief Accounting Officer. Andy Roeder, Chief Financial Officer, is also on the call and will be available for Q&A. Certain statements made in today's conference call regarding Patrick Industries and its operations may be considered forward-looking statements under the securities laws. The company undertakes no obligation to publicly update any forward-looking statement whether as a result of new information, future events, or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company's annual report on Form 10-Ks for the year ended 12/31/2024 and the company's other filings with the Securities and Exchange Commission. I would now like to turn the call over to Andy Nemeth.

Thank you, Steve. Morning, everyone, and thank you for joining us on the call today. I want to begin by expressing my gratitude to the entire Patrick team for their leadership, dedication, passion, hard work, and relentless commitment to serve and partner with our customers throughout 2025. This team continues to elevate the standard at which we operate in alignment with our better together values. Their commitment is what has continued to drive and deliver strong operating and financial results in a very dynamic environment. Our businesses once again proved resilient in 2025, and our focus over the past two years on product development and innovation efforts paid off in the form of meaningful content growth with the 2026 model year changes as we continue our ongoing evolution toward our full solutions model. Our teams remain focused on disciplined execution, scalability, strategic capital allocation, and reinforcing our customer relationships, enabling us to further drive content gains in partnership with our customers across our outdoor enthusiast markets. In 2025, despite macroeconomic uncertainty due to the tariff environment, we welcomed Medallion Instrumentation Systems, Quality Engineered Services, Aegis Group, and Lilypad Marine to the Patrick family. These teams and businesses bring new technology, innovation, deep entrepreneurial spirit, strong engineering leadership, and additional aftermarket content and runway to Patrick. All four of these organizations complement our existing marine full solutions platform, enhancing the value and breadth of products and services we can bring to our customers. Additionally, early in 2025, we strategically complemented our existing investments in composites through the acquisition of Elkhart Composites. We continue to highlight the many benefits of these materials relative to the standard wood products used by both RV and marine industries and are increasingly optimistic that we are just scratching the surface related to the long-term opportunity for…

Thanks, Andy, and good morning, everyone. Demand in each of our end markets continues to be shaped by a combination of macro uncertainty and tariff volatility, resulting in cautious consumer behavior. OEMs and dealers have shown tremendous discipline while OEMs have remained thoughtful in aligning production schedules with retail demand. Dealers have prioritized well-managed inventory levels and selective ordering patterns. Additionally, our team's commitment to supporting customers through scalability, product solutions, customer service, and the goal of a good, better, best product offering have never wavered. This continues to help OEMs operate efficiently, execute model year changeovers, and meet consumer expectations for designs, enhanced features, and highly engineered products. Fourth quarter RV revenues increased 10% to $392 million on a year-over-year basis, representing 43% of consolidated sales. RV content per wholesale unit for the full year was $5,190, which increased 7% from 2024. On a quarterly basis, content per wholesale unit increased 13% year-over-year. For the fourth quarter, we estimate RV retail unit shipments were approximately 60,100, and according to RVIA, RV wholesale unit shipments were approximately 75,000. This implies a seasonal dealer inventory restock of approximately 14,900 units during the period, resulting in an estimated dealer inventory weeks on hand of approximately sixteen to eighteen weeks. While this reflects a modest increase from fourteen to sixteen weeks in 2025, it remains well below the historical averages of twenty-six to thirty weeks. As discussed, we continue to invest in composites and believe they are a superior solution to wood products, which have been increasingly impacted by tariffs and other governmental actions. Teams in collaboration with our Advanced Product Group are focused on the development and production of our new composite solutions that further unlock potential avenues of content not included in our current total addressable market. Testing on our previously…

Thanks, Jeff, and good morning, everyone. I'd like to begin by thanking Andy Roeder for his partnership both prior to and during this transition and by saying how honored I am to be stepping into the CFO role at Patrick. I'm excited and eager to continue working with this incredible team to be their business partner and drive long-term value creation through disciplined financial planning and execution. Now moving to our financial results, consolidated net sales for the fourth quarter increased 9% to $924 million, driven primarily by market share gains and M&A. This growth was comprised of 9% organic growth and 2% acquisition growth, partially offset by negative 2% industry. As Jeff discussed in detail, our outdoor enthusiasts focused businesses more than offset a 5% decline in our housing revenue for the fourth quarter. For the full year, net sales increased 6% to approximately $4 billion. Full-year RV revenue increased 9% to $1.8 billion, and marine revenue increased 6% to $606 million. Our powersports revenue increased 9% to $384 million, and our housing revenue increased 1% to $1.2 billion. The improvement in revenues across our markets was largely supported by content per unit gains, acquisitions, including our increasing aftermarket penetration. Our housing business remained resilient despite softening MH shipments in the second half of the year. Gross margin was 23% in the fourth quarter compared to 22.1% in the prior year. The increase in margin was due to factors including leveraging our fixed cost structure through content gains realized from the model year changeover season, stronger revenues, and accretive acquisitions in the aftermarket space. For the full year, margin was 23.1%, compared to 22.5% in 2024. In the fourth quarter, adjusted operating margin expanded 110 basis points to 6.3%. This improvement was driven by stronger revenue in our outdoor…

Thank you. And with that, at this time, we will be conducting a question and answer session. We do ask that you please limit yourself to one question and one follow-up. Before pressing the star keys. And our first question comes from the line of Joe Altobello with Raymond James. Please proceed with your question.

Hey guys, good morning. I just want to go back to a comment you made earlier about content per unit. I think you mentioned you're seeing meaningful increases there with the new model year changeovers. Can you maybe elaborate on that a little bit more? Does that reflect larger and more content than units? Or is it largely share gains?

Yes, Joe. This is Jeff. Excuse me. This is Jeff. A little bit of a combination of both. Certainly, over our model change, we did pick up some content in a few areas with the composite starting to come into play. Some of the electronics and some further penetration on our core products. On the marine side, really the same across the board. So pickups at model change. On the RV side, we did see a little bit of help from the mix as we've seen some of the bigger higher contented units start to come into play in the third and fourth quarter. So kind of a combination of both. Very helpful. Thanks. And maybe just to shift gears a little bit, on the operating margin outlook, the expansion of 70, 90 basis points that you're calling for. Can you give us a little bit more color on what's driving that? How much is coming from volumes, from pricing, from mix, etcetera?

Hey, Joe. This is Andy. Think as we look at the business and it's a combination of both. Volumes certainly help as we're situated really nice now. And I look at the platform. When I look at our cost structure, we're just really well positioned to support a volume increase and a significant volume increase without adding significant overhead. So there's definite volume play there. I think as well, when we look at the content gains that we've got, the solutions that we're presenting and working with customers on, the opportunity to help bring a low-cost alternative through a full solution to our customers is significant out there. And so we think that's going to add value as well from an overall margin perspective, even being more competitive in pricing with some of these. So we're excited about kind of the entire platform. But leveraging volume certainly as we look forward and any upside that we see on the shipment levels, we're optimistic, especially as it relates to our cost structure today.

Got it. Thank you.

And our next question comes from the line of Daniel Moore with CJS Securities. Please proceed with your question.

Obviously, solid results in Q4. Appreciate taking the question. Following up maybe on Joe's question, appreciate the market outlook for each vertical. Can you talk about any cadence you might be expecting embedded in those growth rates in those kind of market shipping growth rates? How do we see shipments shaping up for Q1 and H1 versus H2? Kind of across verticals? And any commentary on the cadence of that margin improvement as well would be really helpful. Thanks.

Yes, Dan. As right now, I think where we see things is inventory levels are extremely lean even with a little bit of restock that we saw in the fourth quarter. We think inventories were incredibly lean at the end of Q3. And so what we're really excited about too is there's just tremendous discipline between the OEMs and the dealers today as it relates to managing inventories. And it's really positioned everybody, you know, well to be able to scale, at least us, certainly, to be able to scale going forward. And so right now as we're in the early, early parts of kind of Q1, there is optimism is what I would say, and there's, you know, we're excited about the potential that exists, but dealers are staying very, very and OEs are staying very, very disciplined to maintaining these lean inventories. And I think as we move into the selling season, in late Q1, Q2 is when we would expect to start to see things move or hope to start to see things move. And so Q1 right now is what I'm gonna say, disciplined and thoughtful. Would expect uptick Q2 and Q3 as the selling season occurs. And movement typically to that seasonal model for us where Q2 and Q3 are the highest. Q1 is patient right now is what I'd say, but thoughtfully patient. And, you know, like I said, I think we're really optimistic about where we can play in this especially with our scalability value proposition. We've positioned ourselves really well. We used our working capital in the form of inventory a little bit heavier on inventory in Q4 in anticipation of this uptick, we're going to be able to move very, very quickly when things do move. And so that's where we kinda see things. But I like the discipline that we see today. Everybody's just being really thoughtful in Q1. And so it's a little patient and tempered right now, but with optimism, that we move into Q2 and Q3, we'll see that uptick across all of our markets.

Certainly helps. I'll circle back with any follow-ups. Thanks, Andy.

Sure. Thanks.

Thank you. And our next question comes from the line of Craig Kennison with Baird. Please proceed with your question.

Hey, good morning. Thanks for taking my question. So we're sort of coming through this period of very high inflation. Wondering if you can just give us an update on what you're seeing in terms of your cost pressure and whether that might subside and really help this affordability trend unlock.

Yes, Craig. This is Jeff. Across a lot of our products, we're seeing some stability in the pricing. We've seen that there are some commodities that are still moving, the copper, the aluminum. So we're managing through that. There are a few, I'm going to say, pieces of noise when it comes to the wood that we sell, specifically the Luon. So we're working and dealing with that. We'll see kind of the end result of where that happens probably in May. So, I mean, overall, I think we're staying pretty with our pricing with our customers. Only moving where we have to. And really, the only, I'm gonna say, three places we're seeing that are some of the commodity items and what.

And then to follow-up on Joe's question about content per unit, as you look ahead, how much of your growth is tied to pricing related to cost pressures that you face versus mix and some of the acquisitions that you've done? If you could put those buckets together.

Yeah. It's gonna be a lot heavier on the mix and the organic growth on our content. It's gonna be less on the pricing at least in the near term here. From what we see on pricing based on the comments I made before the commodities that we're dealing with.

Got it. Hey, thanks. I'll get back in the queue.

Thank you. And our next question comes from the line of Noah Zatzkin with KeyBanc Capital Markets. Please proceed with your question.

Hi, thanks for taking my questions. I guess first just on the kind of marine revenue growth. Could you help parse out, I guess, how much of that year-over-year increase was driven by the acquisitions versus kind of legacy business? Would be helpful?

Sure, Noah. This is Andy. I think just in general, what we would say is there's definitely a piece of that related to the acquisitions, but our teams worked really hard on new product development and bringing new content to our customers. So most of it's gonna come from the form of content and the solutions that we've been bringing to the table for customers. In alignment with model year change in 2026. And a lot of this, some of this starts really at the foundation, which is our marine concepts operation, which designs tooling for new boats. And this is really the foundation that we build off of as it relates to our solutions model to be able to put together kind of a full package for customers to be able to really go into their boats and make meaningful changes, especially as it relates to the prototyping that we do. So again, we've seen it across a number of product categories, but tremendous effort by our team to really just get out there and bring new innovations to customers. So in answer to your question without giving a specific number, which we don't break down between our markets, the majority of it's come in the form of content gains with new product development and innovation. And there is a piece of it, but most of it's come through our product efforts.

Great. Really helpful. Maybe just one on the RV side. Obviously, nice performance there, particularly kind of relative to the industry. In terms of the content per unit increase during the quarter, how much of that is this might be difficult to answer, but how much of that is kind of related to maybe share gains versus mix? And to the extent that is a bit related to mix, how do you kind of see mix playing out next year in terms of RV units? Thanks.

Yeah. So I you know, we were saying before, we don't break it out by mix and what is organic growth through market share gains. There is definitely a component that is the mix in the fourth quarter along with the market share gains that we saw through the model changeover. You know, moving forward, you know, we're keeping a close eye on the production levels right now, Noah. You know, they seem to be pretty consistent from where they were from the fourth quarter to the first quarter, you know, is looking across the spectrum. And we do see that it is starting to get a little bit closer to normalization with the spread between the fifth wheels and the travel trailer production. So I don't think we're going to see a different effect from the fourth quarter. But it's hard to say, you know, where that's gonna take us into the second quarter. As far as the mix.

You know, additionally, I think when we look at mix traditionally and historically, you know, certainly, Fifth Wheel for us is more meaningful content just due to the size of the units. And so we did see a little bit of an uptick from a mix in Q4. Fifth wheel typically around 20% of the overall towable mix. And the fields are up to 22%, 23% of that overall mix in Q4. So there's some encouraging signs I think right now, but that's all typical restock in Q4. As we kind of enter the selling season, the anticipation of you know, where buyers are gonna be. So we're optimistic. We absolutely like to see larger units from a content perspective. But, again, right now, it's just too early to tell. We think that it's seasonal, but also there are some there's a little bit of movement out there today at the retail level from at least what we're hearing as it relates to interest in some larger units. So we're optimistic but cautious. And again, I revert back to kind of where the dealers and the OEMs are at. They're just being really thoughtful, you know, about where they sit today and waiting, you know, to make sure that things are moving before they do anything, and we feel really good about that. So again, long answer, but we are seeing a little bit of movement today on that mix. For us, it's a good thing. Hopefully, it plays out further as we move into the year, but we'll wait and see. In Q2, we'll have a better feel for that.

Thank you.

And our next question comes from the line of Scott Stember with Roth Capital.

Hey, guys. This is Jack Weisenberger on for Scott. Thanks for taking our questions. Just within powersports, can you kind of give us an update on what's driving the good content per unit increases and how attachment rates are progressing?

Yeah. This is Jeff. Attachments rates, as we've talked, continue to grow in favorability across the utility platform. We saw it in the fourth quarter. We continue to see it moving forward based on the projections we're getting from the OEMs we deal with. So we're really excited about that. That's really a big component of what's driving the growth on that side of the business.

Great. Thanks. And then moving to the aftermarket, and the RecPro, can you give us an update on where things are showing up in the segments the most? And what is kind of ahead of your expectations so far?

Yeah. They've added quite a few SKUs to the RecPro site from our Patrick divisions. I will tell you primarily heavily on the RV side to begin the year, but then as we got into the middle end of the year, we started to get some more of the marine and powersports products online, which is really exciting. You know, we saw a pretty good increase in our aftermarket sales year over year. That we stated in their prepared remarks. And two-thirds of that came from acquisition, which was a big piece of that was a rec prone. It's come along very well in our minds.

Great. Thank you, guys.

And our next question comes from the line of Tristan Thomas-Martin with BMO Capital Markets. Please proceed with your question.

Hey, good morning. Just a couple of questions on composites. One, I was curious about the TAM and where you think penetration is and kind of what's the cadence as we move forward? And then also, like, how does it compare from a margin perspective relative to more traditional wood products? Thanks.

Yes, Tristan, this is Jeff. As far as the TAM, you know, what we've stated in the past, we think the overall TAM on a long-term basis is about $1.5 billion. I think on a short term, there's more like about $500 million of attainable. Certainly, there's a component there that has to do with the amount of capacity that we have on the composite side of the business versus what is currently wood products in the market. So we feel really good about that. As far as margins, we don't talk about specific margins with, you know, relative to products. So I will tell you that we're watching that. We, you know, we pay attention to where we're at on our margins. We're managing that very closely. But we don't talk specifically about what the percentages are versus the other products.

Alright. Thank you.

And our next question comes from the line of Mike Albanese with Benchmark. Please proceed with your question.

Hey. Good morning, guys. Thanks. I'm to ask about aftersales. It was kind of touched on a couple of questions ago, but if I could just follow-up briefly on that. You've obviously been adding SKUs now pretty consistently. You know, as we think about or I guess the question is, I mean, how much incremental pull-through are you seeing from these SKU additions? Or how can we think about, you know, timeline, from all these product additions in terms of when you get that incremental lift on the back end within aftersales? Really, just any context on how to think about that would be helpful.

Yeah. This is Jeff. You know, it's kind of a long-term game when it comes to getting the products onto the site. That's the easy part. Certainly, you know, the marketing and the advertising to get some pull-through on those, also looking at how to the other piece of it is, is that there are one-for-one replacements now out there for Patrick parts that weren't out there before. So think over the next, you know, six to twelve months, we'll have a better gauge on what the pull-through is gonna be on those products that we're adding. But again, we have to really get the advertising out there to be able to, you know, get the right clicks when it comes to what you're seeing on an e-commerce site like RecPro is. So it's a timing game, but certainly getting the products on there is the, I'm gonna say, the easy part. But getting the pull-through is what's gonna come next.

Yeah. Absolutely. That's helpful. Have you commented previously on incremental marketing spend to kind of drive this initiative?

No. We haven't.

No. But it's okay. Here's what I'd say, Mike. It's typical to what you're seeing in our profile today. I mean, that's built into kind of the overall gross and op margins that we were seeing today. I wouldn't expect a significant change. There's not a lot of incremental, but that's going to come with incremental volume. So it should be typical to what that as an admin mix.

Yeah. So, I mean, the quick answer is when I think about your 70 to 90 bps expansion rate, that's included. That's baked in there.

Correct.

Thanks, guys.

Thank you. And with that, there are no further questions at this time. I'd like to turn the call back over to Andy Nemeth for closing remarks.

Thank you. I want to once again just thank our team for tremendous, tremendous efforts, dedication, commitment, just tremendous contributions to the organization as a whole. Most importantly, with the partnership with our customers over the past year, which has been extremely dynamic and extremely volatile. And our teams just demonstrated tremendous resilience. We've just been shown versatility. Just feel really good about where we sit today. And our company is well-positioned. The team's in great shape, and we're really excited about what we can control going forward despite what's happened in our markets. And again, it's really reflective of the commitment from our team. But as well, want to thank our customers and partners for all of their support throughout 2025. And we're optimistic about 2026 at this point, and we're really well prepared to again capitalize on the things that we can control in 2026. So thank you very much. We look forward to talking to you on our first quarter 2026 conference call.

Thank you. With that, ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time. And have a wonderful rest of your day.