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PATRICK INDUSTRIES INC (PATK)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered a clean top-line beat with net sales up 6% to $975.6M and diluted EPS of $1.01; both exceeded S&P Global consensus (Revenue $896.8M*, EPS $0.93*), while margins compressed on model-year changeover inefficiencies .
  • Outdoor Enthusiast segments led growth: RV +7% to $426M, Marine +11% to $150M, Powersports +12% to $98M; Housing grew 1% to $302M. Content-per-unit rose across RV/Marine/MH; dealer inventories remain lean, setting up restock potential .
  • Guidance mix-shift: 2025 adjusted operating margin tightened to ~7% (from 7.0–7.3%), FY free cash flow at least ~$245M (down from at least ~$250M), with improved end-market shipment outlooks (RV wholesale 335k–345k; Powersports wholesale down high-single digits vs low-double prior) .
  • 2026 early outlook calls for 70–90 bps operating margin expansion on sales leverage, CPU gains, and automation/AI efficiencies—an emerging stock reaction catalyst alongside lean dealer inventory restock dynamics .

What Went Well and What Went Wrong

What Went Well

  • Broad-based revenue growth and CPU gains: “Net sales… increased 6% to $976 million… higher revenue in each of… end markets,” with TTM CPU up in RV ($5,055, +3%), Marine ($4,091, +4%), MH ($6,682, +2%) .
  • Aftermarket momentum and innovation: RecPro SKU cross-pollination (“close to 400 or 500” added since acquisition) and APG-driven composites/solutions pipeline; “we are continuing to invest in digital tools, data analytics, and AI-powered solutions” .
  • Liquidity and capital return: $779M net liquidity, 2.8x net leverage, $13M dividends in Q3; opportunistic buybacks ($168M remaining authorization) .

What Went Wrong

  • Margin compression: Operating margin fell to 6.8% (vs 8.1% LY) and gross margin to 22.6% (vs 23.1% LY) on “short-term inefficiencies related to the model year changeover” and temporary factors .
  • EPS dilution from converts increased: ~$0.07 dilutive in Q3 (vs ~$0.04 LY), weighing on GAAP EPS despite revenue beat .
  • FY guidance trimmed: Adjusted operating margin narrowed to ~7%; free cash flow guide reduced (at least ~$245M vs at least ~$250M prior), reflecting cautious macro and investment cadence .

Financial Results

Core Financials vs prior periods (oldest → newest)

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$919.4 $1,047.6 $975.6
Diluted EPS ($)$1.20 $0.96 $1.01
Gross Margin %23.1% 23.9% 22.6%
Operating Margin %8.1% 8.3% 6.8%
Adjusted EBITDA ($USD Millions)$121.2 $135.4 $112.1
Adjusted EBITDA Margin %13.2% 12.9% 11.5%

Actuals vs S&P Global Consensus (Q3 2025)

MetricConsensusActual
Revenue ($USD)$896,763,890*$975,631,000
Primary EPS ($)$0.92625*$1.01

Values marked with * retrieved from S&P Global.

Segment Revenue Mix and Growth

SegmentQ2 2025 Revenue ($MM)Q3 2025 Revenue ($MM)Q3 YoY Growth
RV$479 $426 +7%
Marine$156 $150 +11%
Powersports$96 $98 +12%
Housing (MH + Industrial)$315 $302 +1%

KPIs

KPIQ2 2025Q3 2025Notes
RV CPU (TTM)$4,952 $5,055 +3% YoY; +2% vs Q2
Marine CPU (TTM)$4,012 $4,091 +4% YoY; +3% vs Q2
MH CPU (TTM)$6,670 $6,682 +2% YoY; flat vs Q2
RV Dealer Weeks on Hand19–21 14–16 Lean vs pre-pandemic (26–30)
Marine Dealer Weeks on Hand20–22 16–18 Lean vs pre-pandemic (36–40)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Operating Margin (%)FY 20257.0–7.3% ~7% Lowered/tightened
Effective Tax Rate (%)FY 2025~24–25% ~24–25% Maintained
Operating Cash Flow ($MM)FY 2025 vs Q4 guide$330–$350 (FY) $330–$350 (Q4 estimate) Reframed to Q4; FY optics tighter
Capital Expenditures ($MM)FY 2025$70–$80 $75–$85 Raised
Free Cash Flow ($MM)FY 2025≥$250 ≥$245 Lowered
RV Wholesale ShipmentsFY 2025320k–335k units 335k–345k units Raised
Marine Retail ShipmentsFY 2025Down high-single to low-double Down high-single Improved
Marine Wholesale ShipmentsFY 2025Down low-single Down low-single Maintained
Powersports WholesaleFY 2025Down low-double Down high-single Improved
MH WholesaleFY 2025Up mid-single Up low to mid-single Slightly lower
Site-built Housing StartsFY 2025Down ~10% Down mid to high-single digits Improved
Operating Margin expansionFY 2026N/A+70–90 bps vs 2025 New positive outlook

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/data analyticsInvesting in advanced data analytics; APG solutions model “Invest… in digital tools, data analytics, and AI-powered solutions” to drive efficiency Building momentum
Tariffs/macro15% COGS import exposure; mitigation via sourcing/“good-better-best”; pass-throughs monitored Strategy unchanged; minimizing impacts; dynamic landscape Stabilizing execution
Dealer inventoryRV 20–22 weeks; Marine 20–22 weeks (lean) RV 14–16; Marine 16–18—lowest since pandemic; restock likely into selling season Leaner; restock setup
Composites/solutionsComposite roofing system, marine Bimini, higher engineered systems Composite TAM ~$1B (net ~$1B after cannibalization); unified “Alpha Composites” branding Expanding scope
Powersports attachmentHVAC/enclosures take rates rising; utility resilient Utility enclosures penetration ~60–70% (management estimate); content gains ongoing Positive attachment
Legal/regulatoryQ2 legal settlement affecting GAAP EPS/FCF No new settlements in Q3; guidance reiterated One-off in Q2

Management Commentary

  • “We are continuing to invest in digital tools, data analytics, and AI-powered solutions… to drive greater efficiency, accelerate decision making, reduce costs, and unlock new value” — CEO Andy Nemeth .
  • “Dealer inventory in the field remains lean… we believe there’s some restock needed” — CEO Andy Nemeth .
  • “Adjusted operating margin to be approximately 7% in 2025… 2026 operating margin to improve meaningfully, an estimated 70–90 bps” — CFO Andy Roeder .
  • “We completed the acquisition of LilliPad Marine… deepening our lineup of innovative solutions in the Marine space” — President Jeff Rodino .

Q&A Highlights

  • Restock trajectory: Production upticks into November; lean RV weeks on hand (14–16) suggest restocking into selling season (e.g., Tampa in January) .
  • Margin drivers for 2026: Sales leverage, CPU/content gains, automation/AI; limited overhead needed to support incremental volume .
  • Composites opportunity: ~$1.5B TAM, net close to ~$1B after cannibalization; primarily RV initially; unified Alpha Composites brand to accelerate adoption .
  • Powersports penetration: Utility side resilient; enclosure and HVAC take rates rising; management estimated 60–70% enclosure penetration in utility UTVs among key customers .
  • Aftermarket strategy: Formalized DTC/dealer/distributor approach; hundreds of RecPro SKUs added, expanding Marine exposure; visibility into aftermarket demand improving .

Estimates Context

  • Q3 beat vs S&P Global: Revenue $975.6M vs $896.8M* and EPS $1.01 vs $0.93*; beat driven by CPU gains and acquisitions across RV/Marine/Powersports, partly offset by changeover inefficiencies pressuring margins .
  • Near-term estimate adjustments: Street likely to trim FY margin/FCF on tighter 2025 guide (~7% op margin; ≥$245M FCF), while raising end-market shipment assumptions (RV wholesale 335k–345k) and embedding 2026 margin uplift (70–90 bps) .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat with top-line strength across segments, but margin headwinds from model-year changeover lowered Q/Q margins—watch for margin normalization in Q4/Q1 amid process improvements .
  • Lean dealer inventories in RV/Marine materially below pre-pandemic levels set up restocking as selling season approaches, a potential near-term catalyst .
  • 2025 guide tightened (op margin ~7%, FCF ≥$245M) while end-market shipment outlook improved (RV wholesale 335k–345k), suggesting cautious near-term profitability but better volume support .
  • 2026 framework is constructive: 70–90 bps margin expansion via sales leverage, APG-driven content/composite solutions, and automation/AI—medium-term thesis builder .
  • Aftermarket (RecPro) and Marine product innovations (e.g., Power Bimini, Medallion displays) broaden higher-margin systems content, supporting CPU growth even in mixed macro .
  • Balance sheet flexibility (net liquidity $779M; 2.8x net leverage; no major maturities until 2028) enables continued M&A and organic investment through cycles .
  • Monitor tariff developments and convert dilution; management continues to mitigate tariff impacts and highlights hedges to offset economic dilution upon conversion (accounting remains anti-dilutive) .

Appendix: Additional Data Points

  • Q3 2025 cash flow YTD: Operating cash flow $199M; TTM FCF $211M; total debt ~$1.3B; available liquidity ~$779M .
  • Segment shipment context (Q3): RV wholesale down ~2% YoY; Marine wholesale flat; MH wholesale down ~2% YoY; Powersports revenue grew on attachment/content gains .
  • Q2 one-time legal settlement (motor vehicle accident) impacted GAAP EPS and FCF; adjusted EPS $1.50 vs $1.44 LY, adjusted EBITDA margin +10 bps to 12.9% .