Patrick Industries’ Content Gains Outpace Pricing, Fueling Margin Outlook

Date of Call: Feb 5, 2026

Financials Results

• Revenue: Q4: $924M, up 9% YOY; Full Year: ~$4B, up 6% YOY
• EPS: Q4 GAAP EPS: $0.83, up 98% YOY; Full Year GAAP EPS: $3.90, down 5% YOY. Q4 Adjusted EPS: $0.84, up 62% YOY; Full Year Adjusted EPS: $4.44, up 2% YOY.
• Gross Margin: Q4: 23%, compared to 22.1% prior year; Full Year: 23.1%, compared to 22.5% in 2024
• Operating Margin: Q4 Adjusted Operating Margin: 6.3%, expanded 110 basis points YOY; Full Year Adjusted Operating Margin: 7%, in line with outlook

Guidance:

• RV retail registrations in 2026 expected flat; wholesale units up low-to-mid single digits.
• Marine retail registrations flat; wholesale powerboat units up low single digits.
• Powersports unit shipments up low single digits; organic content up low single digits, implying mid-to-high single-digit business growth.
• MH wholesale shipments flat to up 5%; residential housing starts flat to up 5%.
• 2026 adjusted operating margin expected to improve 70-90 bps vs. 2025.
• Operating cash flow $380M-$400M; CapEx $70M-$80M; free cash flow ~$300M or more.
• Tax rate 24%-25% for 2026.

Business Commentary:

Revenue and Earnings Performance:

• Patrick Industries reported net sales of $924 million for Q4 2025, up 9% year-on-year, and $4 billion for the full year, up 6%.
• Adjusted earnings per diluted share for Q4 were $0.84, including $0.06 dilution from convertible notes, and $4.44 for the full year, including $0.26 dilution.
• The increase in sales was driven by solid organic growth, acquisitions, and content gains, while dilution resulted from the rise in stock price above the convertible notes' strike price.

RV and Marine Segment Growth:

• Fourth-quarter RV revenues increased 10% to $392 million, contributing to 43% of consolidated sales, with RV content per wholesale unit up 7% for the full year.
• Marine revenues rose 24% to $150 million, with marine content per wholesale powerboat unit increasing 11% for the full year.
• Growth in these segments was supported by new product development, innovation, and strategic acquisitions.

Aftermarket and Composites Expansion:

• Aftermarket sales increased approximately 30% year-over-year, now representing 10% of total revenues.
• The company continues to invest in composites, viewing them as a superior alternative to wood products, with strategic acquisitions enhancing their capabilities.
• The expansion into composites is driven by optimism regarding long-term opportunities and the need to address tariff impacts on wood products.

Financial Health and Strategy:

• Patrick Industries delivered free cash flow of $246 million in 2025, enabling reinvestment and strategic acquisitions.
• The company maintains a strong liquidity position with $818 million in available liquidity and has a disciplined approach to capital allocation.
• The focus on scalability, strategic capital allocation, and product innovation is aimed at supporting long-term value creation.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 'strong operating and financial results,' 'resilient' businesses, and 'tremendous' team efforts. They expressed optimism about 2026, stating the company is 'well positioned to deliver sustainable, profitable growth' and is 'extremely confident' in the leadership transition. The tone was forward-looking and focused on strategic opportunities.

Q&A:

• Question from Joseph Altobello (Raymond James): Can you elaborate on content per unit increases with new model year changeovers? Is it larger units or share gains?
  Response: Content gains are a combination of both mix (e.g., bigger, higher-content RV units) and product development (e.g., composites, electronics).

• Question from Joseph Altobello (Raymond James): What is driving the 70-90 bps operating margin outlook for 2026?
  Response: Margin expansion driven by volume leverage (well-positioned cost structure) and value from content gains and full-solution offerings, which can enhance competitiveness and pricing.

• Question from Dan Moore (CJS Securities): What is the expected shipment cadence across verticals and margin improvement timing?
  Response: Disciplined inventory management currently; Q1 is patient, with uptick expected in Q2/Q3 as selling season begins. Margin improvement is embedded in the outlook.

• Question from Craig Kennison (Baird): What are you seeing in terms of cost pressure and inflation?
  Response: Pricing is stable overall, with pressure on some commodities (copper, aluminum) and specific wood products (Luan).

• Question from Craig Kennison (Baird): How much of future growth is tied to pricing vs. mix and acquisitions?
  Response: Growth will be heavier on mix and organic content gains, less on pricing in the near term.

• Question from Noah Zatzkin (KeyBanc): How much of marine revenue growth is from acquisitions vs. legacy business?
  Response: Majority of growth driven by content gains and new product development; acquisitions contributed a piece but were not the primary driver.

• Question from Noah Zatzkin (KeyBanc): What drove RV content per unit increase and what is the mix outlook for next year?
  Response: Q4 increase due to mix (higher fifth wheel proportion) and market share gains. Normalization expected; fifth wheel mix was 22-23% in Q4, up from ~20%. Early signs of interest in larger units, but caution remains.

• Question from Jack Weisenberger (ROTH Capital): What is driving powersports content per unit increases and attachment rates?
  Response: Growth driven by strong attachment rates for utility platform products, with OEM projections remaining favorable.

• Question from Jack Weisenberger (ROTH Capital): Update on aftermarket/RecPro performance and SKUs?
  Response: Aftermarket sales up ~30% YOY; 2/3 of growth from acquisitions (including RecPro). Products added across RV, marine, and powersports; heavily RV initially, but marine/powersports now online.

• Question from Tristan Thomas-Martin (BMO Capital Markets): What is the composite TAM, penetration, and margin vs. wood products?
  Response: Long-term TAM ~$1.5B; short-term attainable ~$500M. Margins not disclosed, but company is managing them closely.

• Question from Michael Albanese (Benchmark): How much incremental pull-through are you seeing from RecPro SKU additions?
  Response: Pull-through is a long-term game; initial product addition is easy, but marketing/advertising needed to drive sales. Expect better gauge in 6-12 months; included in margin outlook.

Contradiction Point 1

Drivers of Operating Margin Improvement

Different factors cited for margin expansion between quarters.

What is driving the 70-90 bps operating margin improvement for 2026—volumes, pricing, or mix? - Joseph Altobello (Raymond James)

2025Q4: The improvement is a combination of volume leverage and the value of full solutions that can be more competitive in pricing while adding customer value. - Andy L. Nemeth(CEO)

Can you break down the 70-90 basis points of operating margin expansion into sales leverage and internal self-help initiatives like automation and AI? - Scott Stember (ROTH Capital Partners, LLC)

2025Q3: The margin expansion will be driven by a combination of sales leverage, content gains, automation efforts (aggressive investment in CapEx), and volume growth that leverages the fixed cost structure without requiring significant overhead. - Andrew Roeder(CFO)

Contradiction Point 2

Current Quarter Margin Pressure

Contradiction on whether margin pressure is due to inefficiencies or stable pricing.

What is the current status of cost pressures and inflation, and will they subside to improve affordability? - Craig Kennison (Baird)

2025Q4: Pricing is mostly stable. Cost pressure is seen on some commodities... The company is managing through this by only adjusting prices where necessary. - Jeffrey Rodino(President)

What are the current production and shipment trends in October and November, and are you seeing the beginning of a restock as previously discussed, or is this merely end-of-year noise? - Joseph Altobello (Raymond James & Associates, Inc.)

2025Q3: Third-quarter margin pressure was due to short-term inefficiencies from model year changeovers and bringing on significant new business... leading to material and labor inefficiencies. - Andrew Roeder(CFO)

Contradiction Point 3

RV Market Outlook and Production Cadence

Contradiction on the expected timing and drivers of RV production volume increase.

How will shipments and margins improve by vertical in 2026, particularly comparing Q1, H1, and H2? - Dan Moore (CJS Securities)

2025Q4: Q1 is expected to be patient and tempered. An uptick is anticipated in Q2 and Q3 as the selling season begins, which is typically the highest season for shipments. - Andy L. Nemeth(CEO)

What are expectations for RV and Marine shipments in the second half of the year, given the RV slowdown and Marine's expected growth despite soft demand? - Joseph Nicholas Altobello (Raymond James)

2025Q2: In RV, the expected seasonal slowdown in production in the second half is due to dealers working through inventories, with OEMs disciplined in matching production to retail. - Jeffrey M. Rodino(President of RV)

Contradiction Point 4

Tariff Impact Mitigation and Cost Offsetting

Contradiction on whether tariff costs are fully offset and passed to customers.

What's the current status of cost pressure and inflation, and will they ease to improve affordability? - Craig Kennison (Baird)

2025Q4: Pricing is mostly stable. Cost pressure is seen on some commodities... The company is managing through this by only adjusting prices where necessary. - Jeffrey Rodino(President)

What is the gross tariff exposure, expected offset amount, portion in 2025 guidance, and anticipated use of pricing to offset costs? - Mike Swartz (Truist Securities)

2025Q1: Offsets are being built into the forecast." and "The goal is to move about half of the China exposure to reduce risk. - Andy Roeder(EVP, Finance, CFO, & Treasurer)

Contradiction Point 5

Operating Margin Outlook Drivers

Contradiction on the primary drivers for the improved 2026 operating margin outlook.

What factors are driving the 70-90 basis point operating margin improvement for 2026 (volumes, pricing, mix, etc.)? - Joseph Altobello (Raymond James)

2025Q4: The improvement is a combination of volume leverage... and the value of full solutions... - Andy L. Nemeth(CEO)

Is the ~85 bps operating margin decline solely due to reduced end markets and not the tariffs introduced since February? - Joe Altobello (Raymond James)

2025Q1: The primary impact on operating margin is from reduced volume (lower RV and Marine shipments). The tariff impact is already baked into the forecast. - Andy Roeder(EVP, Finance, CFO, & Treasurer)