Good morning, ladies and gentlemen, and welcome to Patrick Industries Third Quarter 2025 Earnings Conference Call. My name is Rob, and I'll be your operator for today's call. [Operator Instructions] Please note, this conference is being recorded. And I'll now turn the call over to Mr. Steve O'Hara, Vice President of Investor Relations. Mr. O'Hara, you may begin. Steve O’Hara: Good morning, everyone, and welcome to our call this morning. I'm joined on the call today by Andy Nemeth, CEO; Jeff Rodino, President; and Andy Roeder, CFO. 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-K for the year ended December 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. Good morning, everyone. We appreciate you joining us on the call today. We delivered solid third quarter performance, demonstrating the resilience of our business in a dynamic and unique environment. Net sales for the quarter increased 6% to $976 million, with organic growth contributing more than 4% and offsetting an almost 2% decline in our industry shipment levels. Earnings per diluted share was $1.01, including approximately $0.07 of dilution from our convertible notes and related warrants. On a trailing 12-month basis, net sales were approximately $3.9 billion. Our results reflect both the strength of our diversified business model, solid organic growth as a result of our team's innovation and advanced product efforts and their incredible execution as we continue to navigate dynamic demand levels across our end markets and challenges facing the broader economy. Our OEM and dealer partners continue to exhibit disciplined production, leaving inventory even leaner across all of our Outdoor Enthusiast markets and positioning us positively for a potential restock when retail inflects. We remain well equipped to capture meaningful upside when that inflection occurs, both strategically and organically. We ended the quarter with a strong balance sheet and total net liquidity of $779 million. Our financial position enables us to remain flexible and nimble in supporting our customers' growth needs with a variety of levers while continuing to execute a balanced capital allocation strategy. We expect to continue our investments in the aftermarket and new product development, both through heavy emphasis on model year prototyping and in combination with our Advanced Product Group, which is focused on product development several model years out. Additionally, and importantly, we are continuing to invest in digital tools, data analytics and AI-powered solutions across our business to drive greater efficiency, accelerate decision-making, reduce costs and unlock new…

Thanks, Andy, and good morning, everyone. Looking closer at our end markets, third quarter RV revenue increased 7% to $426 million versus the same period in 2024, representing 44% of consolidated revenue. Our RV content per unit on a TTM basis was $5,055, an increase of 3% from the same period last year. On a quarterly basis, CPU increased 8% sequentially compared to the second quarter of 2025 and increased 9% year-over-year. The improvement in the revenue and CPU in the third quarter was driven by our commitment to working with and supporting our customers with model year innovations as they refine and upgrade their products, coupled with recent acquisitions. We estimate RV retail unit shipments were approximately 100,100, and according to RVIA, wholesale unit shipments were approximately 76,500 in the third quarter. This implies a seasonal dealer inventory destock of approximately 23,600 units during the period, resulting in an estimated dealer inventory weeks on hand of approximately 14 to 16 weeks. This is down from 19 to 21 weeks in the second quarter of 2025 and reflecting continued OEM wholesale production discipline. This remains well below pre-pandemic historical averages of 26 to 30 weeks, and we further believe the number of discrete units in the field is well below levels seen during the pre-pandemic period. Over the last year, we revealed a long-term strategy related to composite solutions. This highlights our efforts to seize emerging market opportunities through both acquisition and innovation. After several years of early-stage development and prototyping, we recently unified our composite solutions under the Alpha Composites brand name. Alpha Systems is a Patrick brand that is synonymous with high-level customer service, providing innovative solutions to RV and MH industries. The team at Alpha Composites will continue to build on the foundation through continued collaboration with…

Thanks, Jeff, and good morning, everyone. Consolidated net sales for the quarter increased 6% to $976 million. Our team drove increased revenues in both our Outdoor Enthusiasts and Housing end markets, including a 7% increase in RV revenues, an 11% increase in Marine revenues, a 12% increase in Powersports revenues and a 1% increase in Housing revenues. As Jeff noted, we generated solid content gains across our end markets during the quarter. Our total revenue growth of 6% was comprised of 4% acquisition growth, 4% organic growth and negative 2% industry. Gross margin was 22.6% versus 23.1% in the third quarter of last year. The decline reflected items, including short-term inefficiencies related to the model year changeover. Operating margin was 6.8% compared to the prior year at 8.1%. This change was driven by the previously described factors. Our overall effective tax rate was 26.2% for the third quarter compared to 24.8% in the prior year. Net income was $35 million or $1.01 per diluted share compared to net income of $41 million in the prior year quarter. Our diluted EPS for the third quarter of 2025 included approximately $0.07 in additional accounting-related dilution as a result of the increase in our stock price above the convertible option strike price for our 2028 convertible notes and related warrants. The prior year's diluted EPS included just $0.04 per share. Adjusted EBITDA was $112 million compared to $121 million, while adjusted EBITDA margin was 11.5%, lower by 170 basis points from the third quarter of 2024. Cash provided by operations for the first 9 months of 2025 was $199 million compared to $224 million in the prior year period. Purchases of property, plant and equipment were $26 million in the quarter and $65 million year-to-date. This implies free cash flow of approximately $134…

[Operator Instructions] And our first question comes from the line of Scott Stember with ROTH Capital.

A lot has been made of some of the increased optimism coming out of Open House. What are you currently seeing from your OEM customers regarding production? What are they telegraphing as far as their desire to start ramping up production to potentially put more units into the field?

Yes, Scott, this is Jeff. As I look at our production numbers or production numbers from the OEMs, we are seeing -- we saw a little bit of a slight increase in October. We're seeing a little bit more of an increase in November. So we do feel like just the pure production numbers would tell us that there is some ramping up to what degree that will be consistent through into the first quarter. But right now, we're seeing a little of that. As I look forward, after this week, we really only have 6 more weeks of production in 2025 with a week off for Thanksgiving. There is some production in Thanksgiving, and then we'll take 2 weeks off for Christmas. So I think early indications are, if I look year-over-year, we're seeing some increases in the back half of the fourth quarter.

Got it. And then moving over to the aftermarket. I know you guys have been doing a lot of cross-pollination with RecPro. Can you give us an update of new SKUs or just -- is that accelerating? Just give us an idea of what's going on.

Yes, Scott, this is Jeff again. On the RecPro side, we've had several hundred SKUs that have carried over from other Patrick divisions into RecPro this year so far. We'll be close to 400 or 500 when it's all said and done since the inception of the acquisition. We are looking to accelerate that a little bit. We've really got them entrenched with our Marine side now and all of our Marine divisions to really start to grow that portfolio within the RecPro side. So really excited. We've put a little bit more capacity in that area to help accelerate that. So we're excited about what we've seen so far and what we're going to see going forward.

One of the other things -- Scott, this is Andy -- is that we just formally launched our aftermarket strategy, which includes a combination of not only direct-to-consumer but direct to dealer and third-party distribution. So we've rolled out a formal strategy. We're implementing structure to really kind of formally launch kind of an overall vision for where we want to take the aftermarket in alignment with our RecPro platform on the direct-to-consumer side. So we're looking forward to really driving some real value in the aftermarket.

Got it. And maybe just a little bit more granularity on your comments about the 70 to 90 basis points of operating margin expansion next year. I assume there will be some sales growth. Just trying to get a sense of how much is sales leverage? How much is internal self-help like things that you have going on like automation and AI and things like that? Just trying to flesh that out.

Sure, Scott. This is Andy. A lot of it is going to be sales leverage. But I would also tell you, content gains, the solutions that we're putting together for customers, allowing them to reduce cost overall, but allowing us with more product content with our customers is going to add value there. And then I think as it relates to the automation efforts, we're going to continue to push forward aggressively on automation amongst our facilities and continue to invest in CapEx. And we're definitely picking up nickels and dimes along the way as it relates to the automation efforts that we expect to see. So a combination of all of those across the platform to drive that margin improvement. And certainly, volume plays heavily in there, especially if we go above and beyond kind of our industry expectations. So we expect to be able to really leverage our fixed cost structure today. We don't need to add a lot of overhead to support significant incremental volumes.

Our next questions come from the line of Joe Altobello with Raymond James.

I guess just to follow up on that operating margin commentary. Obviously, the outlook for '26 is encouraging, but it sounds like you're looking for operating margin this year towards the lower end of your prior range. So maybe what's kind of weighing on margin this year ahead of the '26 improvement?

Well, Joe, here in the third quarter, we really experienced some model change inefficiency. If you look back through the first couple of quarters, we've seen gross margin expansion driven primarily by the addition of our direct-to-consumer aftermarket business, RecPro last fall. Along with that came a heavier OpEx profile. This quarter, our OpEx is in line, but we just had some, I'll call them one-timers, short time -- short-term investments. We brought on significant new business here in the quarter. CPU was up 9% and 10% for RV and Marine. So significant new business. And with that just comes some material and labor inefficiencies.

Got it. Okay. And in terms of the -- what were you seeing so far in terms of production and shipments in October and November? I think it was on the last call, you guys thought that we might see some sort of restock either in the fourth quarter or maybe the first quarter of next year. Are you starting to see that potential restock? Or is this just kind of noise at the end of a year?

I think there might be a little bit of potential restock. I mean we're getting ready to get into the selling season. You got Tampa right around the corner at the beginning of January. I think if you noted during the prepared remarks, 14 to 16 weeks on hand is extremely low. I mean, that's really the lowest we've seen since the pandemic, where it was in the high-single digits of weeks on hand back then. So there's a lot of room there. At the end of 2025, we're at about 17 to 19 weeks on hand. So there's got to be a little bit of restock in there to be able to get the right units on the lots and be prepared for the selling season that's going to come in the first quarter.

Our next question is from the line of Noah Zatzkin with KeyBanc.

I guess, first, maybe if you could expand upon how you're thinking about CPU opportunity in '26. And I guess within that, you talked quite a bit about composites. So just would love to hear some more thoughts on how that kind of plays into CPU opportunity.

Noah, this is Jeff. In 2026, we expect all of our businesses, as we always do, to pick up anywhere between 3% and 5% organic growth. Our expectation is composites is going to be a big part of that. I would tell you, if we look right now where we sit today, we believe the total addressable market in that composite area is about $1.5 billion. If you net out some of the cannibalization that may happen, it's close to $1 billion. Our teams are poised and ready to attack that piece of the market. And I think with some of the other things going on in the market, that opportunity continues to be very strong. Again, our APG groups are coming up with new product development, both on the Marine, RV and Powersports side. We believe that the further, I guess, increased attachment rate on the Powersports side is going to give a lot of opportunity to Sportech as more and more OEMs are looking to go to that full attachment. So I think across all of our markets, we have a lot of opportunity to grow that CPU and continue to grow the business.

Really helpful. And maybe just one more. Maybe an update on just M&A and what you're seeing out there and kind of how you're thinking about that?

Sure, Noah. This is Andy. On the M&A front, we've been really active in the last quarter for sure as it relates to cultivating the acquisition pipeline. We've got candidates identified really across our markets. And so we've been out actively kind of talking, kind of building that pipeline up. But as well, we're starting to see more deal flow come at us from outside sources as well. So both the organic side of it, where we're working with potential targets, as well as the deal feed coming in from investment bankers has increased over the last probably 30 to 45 days in particular. So we're seeing increased activity on the M&A front.

Our next questions are from the line of Daniel Moore with CJS Securities.

I appreciate all the color. I want to maybe ask -- obviously, I appreciate the color about dealers' weeks on hand, both in RV and Marine. As you talk to OEMs and dealers, and we have the sort of historic backdrop of what averages look like pre-pandemic, do you have a sense for or a guess for what a new normal could look like in terms of weeks on hand in those key end markets when we get back to, say, low- to mid-single digit retail growth cadence?

Dan, this is Andy. So if we look at historical numbers pre-pandemic, pre-pandemic RV weeks on hand was roughly 26 to 30 weeks and Marine weeks on hand was roughly 36 to 40 weeks pre-pandemic. So if you look at where we're kind of sitting today, RV at 14 to 16 weeks and finishing out last year at roughly, let's just call it, 18 weeks, we definitely think there's some restock needed. We absolutely feel that the inventories in the channel today across the spectrum are low and that there is a restock needed even in the current environment. So we feel like there's some restocking needed. We don't expect to see the historical pre-pandemic levels, 26 to 30 on RV and again 36 to 40 on Marine. That being said, we definitely know it's -- and we feel like it's bigger than where we're at today. So Marine today, as Jeff mentioned, 16 to 18 weeks on hand. Last year, at the end of the year, we were at 22 weeks. So again, we feel like there's some restock coming and needed. We do feel like inventories are low. But we do think -- I'm going to say let's just say 22 to 24 weeks is probably a good range to kind of think about right now, at least in our estimation. But we also know that dealers have gotten really good at working with less inventory. That being said, we also do feel across our spectrum. And we have multiple touches with the dealer network, whether it's our transportation business or whether it's our touches with the OEMs or dealers themselves. We get a feel that inventories are lean and dealers will need some more balance out there. So we do feel like there's some, again, restock needed.

Really helpful. Switching gears, initial guidance for '26 implies operating margin getting back close to 8%. As you look across the businesses and when demand starts to return, where do you see the most significant capacity and strongest kind of incremental margins and opportunity for further expansion beyond that across the various businesses?

Sure. Given what we've done with our business, our team's discipline and really managing their businesses, some of the consolidations that we've done -- but as well, we're just really maintaining a lean operating structure and continuous improvement environment. There is leverageability across all of our pillars in all of our business segments. So incrementally, there's a few puts and takes. But overall, I'd tell you there is significant incremental opportunity for us to leverage the business in each of our markets.

Got it. And if you did and I missed it forgive me. Could you maybe quantify in ballpark terms the impact of inefficiencies related to the model year changeover in this quarter?

Yes, Dan. I mean, we saw in the first 2 quarters our gross margin expand by near 100 basis points. There's some noise in there with tariff impacts and timing. But for the most part, I think that's -- we expect a meaningful gross margin expansion driven by our RecPro direct-to-consumer margins and that acquisition last fall. So we were down 50 basis points. I guess I'd expect us to be up 50 basis points in that ballpark as we look forward.

The next question is from the line of Tristan Thomas-Martin with BMO Capital Markets.

Do you have any kind of thoughts or have you seen any of the consumer kind of changes based on model year '26 pricing being up, call it, mid- to high single digits?

Can you repeat that question, Tristan? Sorry.

Yes, just asking with model year '26 pricing up mid- to high single digits kind of like-for-like, how are you seeing consumers and dealers react to that?

Yes, this is Jeff. I think they've certainly passed that along into the channel. As we could tell, we did see some increased retail year-over-year in June and July. That came down a little bit in August. But overall, we can only tell you what the production numbers are telling us right now since we haven't really seen retail for September and October. So once we see those, we'll get a better feel overall of the retail demand. But from what we can tell from production levels and where we think wholesale shipments are going, there's still demand out there, and we feel good that they've been able to absorb that into the pricing. And we have seen a little bit of interest rate help, which certainly will help mitigate some of the pricing that's happened. But overall, we feel good about kind of where the pricing has ended up. And I think that as far as what tariff noise has been out there earlier in the year, we've got a few more countries they need to sort some things out with. But as we look -- we've been working very closely with customers. We know that affordability is a big concern, and partnering with our customers to help with that affordability is something that we've been very active in over the last quarter.

All right. Just kind of the obvious follow-up is how is the production mix been looking in terms of like are we seeing maybe a little shift towards fifth wheel from single axle?

Yes, we've seen a little of that. I mean it certainly does occur a lot of times in the fall where we'll see a little bit more on the fifth wheel side as you get the full-time RVers. They're going to use it for the full winter, getting into a fifth wheel versus the smaller entry level. Certainly, the mix is not back to what I would call a normal mix that we've seen in the past with fifth wheel and travel trailer and the smaller travel trailers. But we have seen a little bit of a shift in the third quarter. We expect that, that will stay for the fourth. If we get into the first part of next year -- I think the dealers were so kind of keen on the entry-level product for most of 2025 as we see that they need to refill some of the stock that's out there. I think we're going to see that's going to be in some of the mid- to higher-end product. So we feel good about where the mix is at. I don't think it will go backwards into the more small travel trailers, but we're keeping an active look at that.

Okay. Got it. And then let me squeeze one more in. Is there any way to think about the composite $1 billion addressable market opportunity, kind of how that breaks out across your end market?

Yes, it's primarily in the RV market right now. When you look at the roofing and flooring solutions that we're providing, something that we're really not into that business right now with roofing, flooring and slide outs. The interior and exterior skins are something that we're participating in right now, and we're very active in shifting from some of the wood products that we're currently selling into composites. And we feel really good about all the prototyping that we've done and the activity and the products we've been able to bring to market. Certainly, we see some opportunity on the Marine side. That's pretty fresh on the Marine side. We've done a lot on the wood products within Marine, and now we're starting to shift over into some of the composites. So I would tell you that the majority of what we talked about in the addressable market is going to come on the RV side to start with.

The next question is from the line of Craig Kennison with Baird.

Apologies for joining a little late. I wanted to ask about Slide 15, talking about Powersports' organic content growth up low-single digit. What is driving that?

Craig, without question, content gains that we've seen as it relates to attachment rates for our enclosures in particular, we've seen, as we've talked about kind of the utility side of the business, which is really where we've got tremendous focus, being more resilient than the rec side of it. But that being said, the overall take rate continues to go up on enclosures, and the continued take rate on HVAC systems, which in the side-by-side markets, continues to go up. So we're seeing that. We're seeing some new entrants come back -- come into the market in 2026, but as well as some of the product innovations that we've had teed up over the last couple of years are expected to continue to drive content as well. So we're excited about not only the uptake rate, but some of the solutions we're bringing and then the opportunity for us to really exhibit our full solutions model as well into the Powersports market. So not only in enclosure, for example, but also a sound system, a wiring harness, a dash panel, instrumentation system, all combined into one solution for our customers going forward. So a tremendous opportunity for us to continue to realize additional content gains in the side-by-side market.

And then maybe just to follow up on the RecPro topic. How do you manage any sort of channel conflict that might come about from setting up a direct-to-consumer platform?

Yes, Craig, this is Jeff. I don't see a lot of channel conflict in what we're doing. Prior to having RecPro on board, which gives us that direct-to-consumer avenue for our products, we had very little aftermarket touch points with -- if you look at the content that Patrick is putting into RVs and Marine and then not really having an outlet to be able to get that product into the hands of the end consumer, this has really just given us that avenue. So I don't see a lot of conflict there.

And then maybe finally on the MH side, what will it take to see a more sustained recovery? It feels like there's ample need for affordable housing and we're going to get interest rates moving in our favor. What are your industry context suggesting is necessary for that really to take off?

Sure, Craig. This is Andy. It's a good question. I think as we look at the MH side of the business, we certainly continue to believe in the model that it provides the low-cost alternative, especially for first-time entrants into the Housing market. Historically, MH has run 9% to 11% of single-family housing starts if you go back in history, and we continue to see that trend continue. As far as I'm concerned, as we continue to watch that, we're going to continue to look for an inflection point where we see that trend change a little bit. We see a greater percentage of single-family housing starts as our indicator. But overall, the model, the narrative makes a lot of sense, especially with where things are at. We just think some of the pent-up demand needs to be released into that market. But we're fully supportive of it. And as well the quality of the homes have gotten so much better over the years. And so it really is an attractive solution. We're as well waiting for kind of that inflection point.

[Operator Instructions] Our next question comes from the line of Mike Albanese with Benchmark.

Just want to touch on -- Craig had asked a question about the Powersports segment. And as we think about attachment rates and products like HVAC and audio, is it possible to kind of frame maybe from an industry standpoint what percentage of the overall utility industry comes with enclosures?

Let me think about that for a minute, Mike. So the percentage of the industry probably today...

Utility side-by-side. Like how -- yes, I guess what percent...

How many utility vehicles are coming with enclosures?

Yes.

I mean, I got to take a guess. Probably 60%, 70% is a guess. I can't tell you exactly.

And it's definitely going to be heavier on the utility side versus the side-by-side, Mike. And then we're dealing primarily with a couple of the large manufacturers. There are some of the manufacturers out there that aren't even offering that yet, but we believe that's a big tailwind for us when they start to go into that market. So within our customers, it's that 60%, like Andy was talking about. But the overall market, I think there is opportunity beyond that.

Yes, that's exactly where I was going with the question, to get a sense of -- as just enclosures proliferate, with that comes more opportunities to drive new product and increase attachment rates, right? So I was trying to get a sense on...

Not only that, Mike, but the frame -- not only -- so some come with a frame, right, some come with a windshield, the attachment to add doors, to add windows. Then the additional content that we've talked about on top of that from a solution perspective kind of all play into that.

Thank you. Ladies and gentlemen, I'll turn it back to Andy Nemeth for closing remarks.

Thank you. Once again, I just really want to acknowledge and thank our incredible team for just their continued efforts, dedication, passion for really partnering with our customers, bringing new products to market, managing the tariff situation and continuing to deliver consistent and predictable results. I'm just so proud of the team and all their efforts. And as well, I want to thank our customers for their tremendous support through these incredibly dynamic times as we continue to really work to partner to make sure we're promoting kind of the industry as a whole in alignment with their goals and objectives. So really appreciate all the efforts of the team. We will continue to push forward. I think there's a ton of opportunity for Patrick as we look at where the industries are teed up and where they can go. And not only that, the resilience and scalability of our model and the ability to inflect when our customers need it I'm really excited about. So once again, thank you very much for joining us. We look forward to talking to you after our fourth quarter results.

Thank you. Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation. You may now disconnect.