Patrick Industries, Inc. (PATK) Earnings Call Transcript & Summary

Thanks for joining us today. My name is Steve O’Hara. I'm Vice President of Investor Relations of Patrick Industries. So first, before we dive in here. I'd like to just let everybody know we have vests for everybody, who don't have your size, we can get it. So that should be on your way out or way in. But first, I think we got a good day for everybody here. Just this is the forward-looking statements. So I'd like you to just please take note of the cautionary note regarding forward-looking statements in the deck here. I'll pause for a minute to let everybody just look over it. Okay. Then with that, I'll kind of give you a brief overview of the agenda. So first, we'll have Andy Nemeth come up. He'll give you a kind of an overview on Patrick and our vision and strategy. And then we'll have the end market presidents speak about each end market. We'll do a short Q&A and then break and then we'll have -- we'll dive into operational excellence, advanced product group, our M&A strategy and then marketing with empowering enthusiasts before hitting our Better Together culture with Todd, and then we'll wrap up with Andy Roeder on our financials. So with that, I'll bring up Andy Nemeth, our CEO. He's been with the company over 25 years, held the position as CEO since 2020 and also has been our CFO and President as well. So thank you.

Thank you, Steve. Welcome, everybody. Thank you so much for joining us today. Just to let you know, we had a great morning this morning. We were able to ring the opening bell for the first time in the company's 65-year history, and we brought 40 out of our team members out and their spouses to really recognize and celebrate the company's evolution over that period of time. And so just has been a great day for us and to kick it off and finish off with this is -- is it going to be a lot of fun. So we really appreciate you coming and taking the time to spend with us. As Steve said, I'm CEO. I've been here -- this is my 29th year with the company. I started in -- I have a finance background. I was CFO for about 15 years, President and now the CEO. And so I've seen a lot of the growth of the company over that, let's call it, that last 29-year period. So any questions you have, feel free to ask me. We want this to be a collaborative session. We want you to feel free to questions that you have. Just to give you some overall takeaways on kind of what I think you should expect for today. First of all, we'll give you some idea on what the vision is. We do have a vision, we've got a strategy. We've got an executable plan and we spent a lot of time thinking about this and where we want to go and really making sure that we stay focused on delivering on that plan. I also want you to take away the strength of our team. I think we're going to have a nice presentations from a lot of our key team members today. So you'll see the depth and breadth and how they think, but just showcasing some of the talent that we have. Competitive advantages as well. So we'll share -- we believe our competitive advantages are and why we think that should be able to make us successful in executing upon our plan. The earnings power of the business, which Andy is going to talk a little bit about and the leverageability of this platform that we feel good about and then overall shareholder value. So just some key takeaways for you that you should expect throughout the day and at the end of the day. So who we are. I'm going to talk a little bit about who we are, how we got here and where we want to go, okay? Overall, the company from a purpose perspective, we are enthusiasts, okay? We're a component solution supplier to the outdoor enthusiast market, RV, Marine and Powersports and as well the Housing market which has been a core part of our business since our inception. But our team members are RVers, boaters, campers, hunters, fisherman, snowmobilers, you name it. The team is very passionate about who we are, our products, our customers, what we do and how we represent those products. And again, I can look across the spectrum. This is a sampling of kind of our senior team members, but overall, I look across the company and everybody is an enthusiast in our company. We live the lifestyle. We are extremely proud to where our brand Jersey, wear the Patrick brand Jersey and as well wear our individual brand Jerseys, which we'll talk about. We definitely are thoughtful about impacting our team and our culture, which Todd Gongwer is going to talk a little bit about, and we also want to impact our communities. We do a lot of philanthropy in our communities to give back. And the bigger and broader we get, the more impact we can have amongst our team members and our communities. So from a purpose perspective, we're very well defined in our organization as far as what we want to do and how we want to contribute. Who is Patrick? So today, Patrick is about a $3.7 billion company. We're about 10,000 employees in 23 different states. We operate under our brand platform. We've got more than 85 brands out there today and look to continue again to execute upon that brand fronted strategy. I'll talk about that. About 75% manufacturing, 25% distribution. And then just from an aftermarket perspective, we're going to share some information on that as well. We're about 7% aftermarket today, but certainly have plans to grow that business and continue that development. Diversification has been a key part of our strategy and vision over the last several years as we entered various markets. And you might say, okay, well, you're in cyclical markets in the outdoor enthusiast space, that being said, they cycle at different times. And so we've seen the benefit of that over the last 4 or 5 years, certainly. Our RV markets generally are the leading indicators into and out of economic cycles. Marine market follows RV by about 6 to 12 months, and then the Powersports market follows the Marine market by about 6 months. And so that has played out very well from our perspective as we moved into these markets as well. Our Housing business has been very resilient over the last 2 years. It's helping support some of the volatility in our enthusiast market. So when we look -- talk about margin resilience, again, we'll show you some information on that. It should -- that should be reflected. And then you think about content and how we've grown the business, and we're going to go back to 2010, and that's really the launch pad for the strategy for the company and how we started thinking about this model. And we're very simplistic in the way we think about it. We keep things simple and try to make sure that we stay focused on where we want to get to. But you can see at the bottom half of the slide kind of the information on content per unit where that's gone over the years and how we've been able to diversify business and how much potential there is. And we're going to show you some TAM out there as it relates to each of our markets and why we think there's continued opportunity for both organic and strategic growth inside those markets. So how did we get here? And just to give you a little bit of history on the timeline. So Patrick was founded in 1959, incorporated in '61. It went public in 1971. But really, the company operated and started as a manufactured housing supplier in those years, did a little bit of RV. 2005 was a turning point for Patrick in that, a company called a private equity group called Tontine came in or an equity group capital group called Tontine came in and bought out the founder shares at that point in time and really changed the opportunity for the company. Allowed us access to capital, gave us the opportunity to create strategic vision and really focus on a forward-looking approach, which would kind of pass along or kind of died a little bit along the way. So 2005 was really an inflection point for us. In 2007, we acquired our largest competitor, a company called Adorn, which was a merger of equals, which really was the transformational event for the company as a result of Tontine support and investment in Patrick. In 2010 is when we really kind of launched on our M&A strategic growth strategy, and that's when we started to acquire in the RV space, in particular, it was right close to home. We're based out of Elkhart, Indiana. Elkhart, Indiana is the RV Capital of the World. Everybody is within -- is within, I'm sorry, about a 50 square mile radius of each other, whether it's suppliers, the OEMs, the banks, everybody is right there in this community. And so it was easy. We knew everybody, and it's very easy to do M&A because it takes about 15 minutes to get to any place that you want to get to in Elkhart. So we executed on the RV strategy in 2010. In 2016, we dipped our toe in the Marine market. We like to get a feel for what the market looks like before we go in, and we dipped our toe with an acquisition of a company called BH Electronics and really like that market, found it to be very similar to our RV markets and continue to execute on the same strategy that we did in the RV space from 2010 to 2017. Once, however, we did that, we then moved into the Powersports market in 2022 through the acquisition of a couple of audio companies. And then in 2024, we just did an acquisition of a company called Sportech, which is really our platform launch into the Powersports space. Aftermarket as well in 2024, we bought a company called RecPro, which Jeff is going to talk about, which is an incredibly leverageable platform for us that has so much opportunity to really expand across our markets. I'm going to tell you, as more than we even anticipated today, the issue with RecPro is not finding the opportunities, it's prioritizing and executing on them because we so many. So very excited. But when you think about the strategic direction and evolution, we kind of do, we replicate the same strategies that we've been successful at in the past and again, keeping that very simple. We are a brand fronted organization, and we go to market through our brands. You might ask, hey, why do you do that? Why do you not consolidate all these up into one company? I'll tell you that our brand platform is made up of incredibly strong business, incredibly strong principles and entrepreneurs that are very proud to wear their brand Jersey and our customers associate with our individual brands. And we try not to disrupt what the brands have accomplished over the years and their development. We don't buy. I'll talk about our acquisition M&A a little bit later on how we categorize targets. But our brands are what our customers associate with. That's where each one of them has their own DNA that's made them successful. We buy successful business models, and we allow the brand entrepreneurs to continue to wear their jersey and run the business. And again, it's keeping it simple. But we do execute on the synergies behind the scenes. So all that is with the brand platform in front, we kind of say, okay, as long as our customers know that the brands have the resources of Patrick behind it, whether that's financial, operational, structural, you name it. That's what we care about. And that's what our customers enjoy. They want to continue working with the individual and they do like the fact that Patrick can support that. And then we work on synergies behind the scenes. So we'll talk about that in our M&A section. But maintaining brand DNA is critical for us as it relates to our M&A strategy, and we're going to continue that philosophy. It's not as complicated as you would think. It's really about making sure you're acquiring tremendous talent that has the ability to execute and the brands that we -- we don't buy broken businesses. So these brands are successful in their own right. It's very simple. If it's not broken, don't fix it. And that's -- we try to stay very, very true to that. But if it is broken, we will fix it. So just see you know, we don't let things faster for a long time if we see something that's not working inside one of our brands. But for the most part, like I said, we're buying successful businesses, and we just want them to keep doing what they're doing. So all of this has translated into a track record of consistent and steady growth. And you can see the COVID years there in '21 and '22. But if you trend line this, again, to me, it's up and to the right as it relates to the performance and the growth of the business from a revenue perspective. And this is a result of the accomplishment of our strategic objectives as well as our organic growth over this period of time as well, which we'll talk about again. I'm going to talk about how we are able to execute upon this plan. But this is kind of the model that we look to continue to replicate and our hope and goal would be that we do this into the future. The other thing that this has really delivered from our perspective is resilient in increasing margins over the course of time. And so the top line here represents our gross margin profile going back to 2010, the inception of the strategy. And again, our goal is to continue to deliver accretive margins. And we'll talk about how that works and how we get there as it relates to the strategy, but all this plays into, again, continuing to -- continue to look forward to accretive margins on a go-forward basis, which is what we certainly want to accomplish. So vision, just to give you some perspective, we do have a vision on where we want to be. We do 5-year strategic plans every 3 or 4 years, and we hold ourselves accountable internally to these strategic plans, which include various components to them as it relates to capital allocation, which is very important to us. We throw off a lot of cash flow. We're going to reinvest that cash flow back into the business. So I'll point you kind of to this slide, which is kind of where our goal is. So today, we're about 70% outdoor enthusiasts, 30% housing. Our vision for the future for the next 3 to 5 years is to be 85% outdoor enthusiast, 15% other, which could include Housing, may include Housing, may include something else. And I'm not looking to -- we're not looking to step too far out of our sweet spot today, which is going to be RV, Marine and Powersports. But our goal is to continue to penetrate into that market and so as we look to grow the business, we've got a vision in a pipeline that's there. From an execution, how do we execute upon this. From a capital allocation perspective, we're looking to redeploy capital back into the business. And so just to give you some color on how we build the model, okay, this 3-year strategic plan. We take our content per unit. We use an industry assessment for growth in each of our markets over that period of time, pick a number, 3%, 5%, 10% whatever you want to use, okay? We generate a model that generates cash flow. We're going to reinvest that cash flow back into the business. We're going to use a leverage target of 2.25 to 2.5x. So in periods of growth, we may spend more than $400 million or $500 million depending on what that operating cash flow looks like to reinvest in the business and grow that. And if you build that out that should deliver continued accretive margins that you saw in the previous page, both on the gross and operating level. Aftermarket overlay is part of our vision, and we just started that strategy with RecPro and again, like I said, RecPro is going to be able to fold over our outdoor enthusiast space today to be able to really incorporate the products there organically and then continue to grow strategically, especially as it relates to some of our OEM customers that are looking to buy RecPro products today. So a lot of opportunity in the aftermarket but tremendous opportunity organically inside our existing outdoor enthusiast business to leverage that RecPro platform. We are going to prioritize outdoor enthusiasts, okay? So it's going to be RV, Marine and Powersports is where our focus is at. That's where we want to grow strategically. I'm not saying that Housing is not a strong business for us. We've just quite candidly outgrown the M&A of candidates that exist out there in the Housing space. And I'll talk about the key components that we look for in an acquisition candidate. They're more fruitful in the outdoor enthusiast space, which we know very well, and we look to be able to deliver upon. And then from a financing structure perspective, we're going to continue to make sure that our financing structure is positioned to be able to support the growth model that we have today. We just re-upped our senior notes 2 months ago. Andy will talk a little bit about that. We moved out our debt wall. And so we're well positioned today with tremendous liquidity to execute on this plan. So again, it's going to be about redeploying cash flow, utilizing leverage of 2.25 to 2.5x into the business, and we'll talk about capital allocation and those priorities, but M&A is a big piece of that to deliver this growth strategy. Our markets today. So not only do we feel good about kind of an executable strategy that we have in place, but our markets they are in a really good position and to me, this slide is really the 33 -- 35- to 44-year-old age demographic, and it is really simple to me. This is the group that's starting to accumulate wealth. This is a group that is buying RVs, first-time homebuyers, remodeling homes, buying boats, buying Powersports. This is kind of the sweet spots for our market today. The average age of new RV buyers today is 32 years old. That's down 10 years, it used to be 42 years old from what it was just 4 or 5 years ago. So the age demographic continues to move to younger buyers in the RV space. And this age demographic, 35 to 44 is expected to continue to grow for the next 10 years, okay? That fits right in the sweet spot of our market. So just from a demographic perspective, we feel good about the demographics that are out there in play today. And then when we look about our model and how we're positioned today, a couple of things. First of all, we've got a high variable cost model. We don't hesitate to take cost out of the business. We're very operationally focused. We are flexible and nimble, and we're looking to be able to move up and down as it relates to our revenue stream. Our revenues -- our markets don't move in 3% and 5% increments. They generally move in 10% and 20% increments. And so we have to be very scalable and nimble both up and down. We've got flexible working capital, highly scalable capacity, so we can move up or down fast as we want to. And then now we've got an advanced product group, which we're going to talk about, which is going to be able to accelerate our organic growth platform on a go-forward basis and strong customer relationships. Where our markets at today? You can see kind of the charts there as it relates to where wholesale shipments are at. But to me, it's about inventory balance in the channel. In the RV space, there's 16 to 18 weeks of inventory on hand out in the dealer space today compared to a historical average of 26 to 30 weeks. We don't expect it to get back to 26 to 30 weeks, but we don't think 16 to 18 weeks is sustainable. In the Marine space today, there's 19 to 21 weeks on hand. There's a historical average of 36 to 40 weeks. Again, we don't expect to get back to 36 to 40 weeks, but we don't think 19 to 21 is sustainable either. So we believe there's a restock. So we think our markets there are bouncing along the bottom. Our Powersports market is calibrating a little bit. It's the third in that outdoor enthusiast cyclicality, as I mentioned before. So Q4, probably Q1 is what we're anticipating now maybe a little bit into Q2. But overall, we think that market is calibrating from an inventory perspective, and our other markets are positioned well. And in our Housing market, there's just a lack of affordable housing out there today. And there's a lack of affordable inventory. And we're seeing resilience today and a possibility that the MH narrative going to start taking some hold. And so that's been a positive for us as we look out across our markets. So strong demographic trends and industry conditions look very well positioned to support this next up cycle. How are we going to do it? From a growth perspective, strategically through acquisitions. So we're going to deploy capital on M&A. Over the last 15 years, we've done 75 acquisitions of over 85 different companies. We spent $2.5 billion, executing this strategy, which I showed you on the chart, organically, we have organic targets that we target our team to, 2% to 3% organic growth, net of inventory and net of pricing is our expectation amongst all of our on an annual basis. So we look to deliver both strategic and organic growth. You've got end market growth, which we're anticipating. We think we're bouncing along the bottom right now. So again, as I talked about weeks on hand, demographic trends, all we need in our minds is a little bit of interest rate relief and some consumer confidence to kind of give us a little bit of push to start our markets are moving. So we're hopeful that we'll see that here and as we do, we'll expect to be able to be very scalable. And then aftermarket runway, as I talked about, really simple from my perspective, it's executing upon the organic opportunities that exist in our aftermarket platform today. So we feel like we're in a good spot. Our markets are like I said, demographics are strong. Our markets are kind of bounce along the bottom, ready to execute with low inventories in the channel and our business is sized according to the current revenue stream. So all this, bringing it together, as I said, 2010 is kind of a launching point. 2010 to 2024 is the execution of a strategy and a proven track record and ability to execute upon a strategy and vision that was defined in 2010. And as we look at 2025, we're just going to continue to replicate that model. We look to replicate that model. And so like I said, markets poised, demographic trends, strong customer relationships, our aftermarket platform and then not only our advanced product group, but we have moved from being a component supplier to our markets to a component solution supplier to end markets and what I mean by that is not bundling products together for a customer. It's putting product solution packages together. And I use ski and wakeboard tower. So we do ski and wakeboard towers. We can incorporate audio systems, wire harnesses, dash panels. All systems into a plug-and-play solution for our customers that makes us that much more sticky. We can put IP on it. We can be very, very progressive as it relates to where we want to go and looking out into the future of being much more sticky with our customers. So as we look at where we're at today, we feel like we're really well positioned, and we've got a model that we are hoping to be able to execute on that has been proven in the past. Again, we feel like we're just in a good spot and waiting for the next upturn. So with that, I give you a little bit of history on Patrick, tell you about where we're at, but I also want to turn it over now. So we're going to talk about our markets a little bit. Each of our market presidents is going to come up here and give you a little bit of perspective on what they see and tell you a little bit about why, again, we feel like we can deliver on this strategy. So Jeff Rodino is the President of our RV business today. Jeff's got 28 years with the company, tremendous industry experience and is very knowledgeable and again, runs our RV business today, but also helps out in a lot of other parts of the business because of his knowledge and platform. So with that, Jeff, I'll let you talk about our RV market.

Thanks, Andy. Good morning, everyone. I appreciate everybody joining us this morning. Like Andy said, my name is Jeff Rodino, the President of the RV portion of Patrick Industries, really excited to get an opportunity to talk to you a little bit more about our RV business and what we have going on. Like Andy mentioned, I've been in the industry for 31 years. It's kind of hard for me to say that, but it seems like it's been forever. But I've seen a lot of the lot of the ups and downs, a lot of the cycles that happen in the RV industry. So it really gives us a great opportunity or it gives me a great opportunity to kind of express to you kind of where we're at in the cycle with RVs, what I'm seeing, what I'm hearing and what's going on in the market. So we believe the industry is really well positioned for a rebound and an upcycle, the way it says, the way we sit today. As Andy mentioned, that 16 to 18 weeks on hand feels pretty lean out there in the inventory channels. Additionally, we've talked to our touch points to find out that the 2023s are pretty much flushed out. The aged inventory is out of the dealer lots now and really poised for a couple of things. We're poised to have the retail rebound when that retail starts to rebound, there will be restock that needs to happen. We saw it last year. Going into the end of last year, we were at about 19 weeks on hand. And by March, we had dealers screaming for product to get there. And I'll talk a little bit more about that when we get to some of our -- sorry. So just to dig a little bit more into the RV portion of our business, $1.6 billion, 45% of the TTM consolidated revenue at Patrick, and as you see, we've had a 10% CAGR on our content per unit from 2019 to 2024. I think one of the really niche things on this chart and our teams, our sales teams and our operations team have done a tremendous job growing the business. If you look in 2019 with 406,000 wholesale units, we are at $1.78 billion and this year, on a TTM basis at 331,000 units, we're at $1.6 billion, a lot of market growth there and a lot of effort through our teams to grow organically, new product and develop innovation along the way. And then as you see, our content per unit has moved up quite a bit from 2019 to 2024. And as Andy mentioned, we talked a little bit about the total addressable market. We believe we have more than double total addressable market just in the product lines that we currently carry today. Just to talk about our capabilities and expertise. You'll see there's several items here, but I will tell you that we are -- we have a lot of experience in the lamination, hardwood, softwoods, fiberglass. I mentioned a few minutes ago when I was talking about the demand from the dealers, we are the #1 transportation company out there. So we are taking products from the OEMs to our lots out to the dealers. So we have a lot of dealer connectivity, not just OEM connectivity and it gives us a really good insight on what's happening out in the market. So just to get to this next slide, we had the expertise on the other slide and the capabilities, but this just shows you where some of our products are. I would simply tell you that anywhere you see, touch or feel on a unit, we're probably involved with it, whether it's the roof whether or not it's the side walls, whether or not it's the interior ceilings, cabinets, countertops, flooring, then the guts of the unit, the plumbing, the electrical, the holding tanks just throughout the entire unit, if you can see it and touch it, we're involved with it. Andy mentioned this a couple of times. We're really excited about the acquisition of RecPro in September. I talked a little bit about our content per unit being at [ $4,800 ] on 313,000 units. Well, in the aftermarket, there's 10 million to 11 million RVs out there on the road. And prior to our acquisition of RecPro at Patrick, we really didn't have a great platform or an avenue to be able to service all of those products. So if you go to the previous page, I mean, we have all of these SKUs without a really good platform to get those to the end consumers that are taking care of these 11 million RVs out there. So you talk about addressable market, it's a big piece out there for us to go after. It's allowing us to expand our product offering into that aftermarket. We're controlling our brands much better on e-commerce, just in the first 3 months. We've found a lot of places where we can control our brand, control our margin, pick up that direct-to-consumer margin versus giving that up to distribution and other e-commerce platforms out there. We're also taking some of the RecPro products and we're introducing it to our OEMs, air conditioners, furniture, so it's really kind of a great combination with this acquisition. And then we're optimizing the platform to be able to add on after we continue -- right now, we're adding on a lot of our RV products into the platform. Next step is to start adding the Marine products into that platform. So we've got teams working on that right now, creating content and putting that in the right spot. So if you talk about competitive advantages in the RV business relationships. If anybody knows anything about the RV business, it's all about relationships. I've been in this industry for 31 years. All of our teams -- our team leaders are 15, 20, 25-plus years in the industry, know these customers really better than anybody else. And that's really helped us grow the business. It established relationships with the new customers in the space as well as the existing customers. The experience and seasoned team, if you talk about the runway where we are acquiring businesses in the RV space from right about 2010 to 2016, we picked up a ton of experience in the industry, whether it's in specific product categories and a lot of those owners and team members that were running those businesses when we acquired them [indiscernible] Vice President. So it's pretty amazing. And then our Patrick studio, if you ever get to Elkhart, our Patrick studio, we've just done a nice refresh on it. We have an RV in there. We've got a boat in there. But our teams also -- we put our whole RV -- I'm going to say our RV executive team there. We have our operations there. We have our sales, we have our advanced product group there, and we have our designers and what we're doing is we're bringing customers through there on a regular basis, and we're designing and developing their units from the start, all the way up to the finished product. So with that, I appreciate your time today. I'm sure we're going to be asking questions and answers later. But any questions you have for us later, I'd be glad to answer them. With that, I'm going to hand it over to our President of our Marine division, Rick Reyenger, to talk more about the Marine business.

Thank you, Jeff. Well, I appreciate the opportunity to be here this morning and really look forward to sharing a little bit of vision on what we're doing on the Marine space of our business. It's a business that I'm very passionate about and that starts with really a 40-plus year career in the Marine industry. So when I look back at my career, I've done everything from propulsion to boats, to components, the parts and accessories. And so I've really covered the gamut in leadership positions in the Marine industry for a long period of time. Prior to joining Patrick, 6.5 years ago, I had started and partnered with a private equity group about 20 years ago. We're doing the same thing that we're doing today at Patrick. We were looking at consolidating and rolling up component businesses. And over that period of time, we built a very successful business. We weathered some storms. And so I pretty much have seen it all in terms of the marine industry and some of the cycles that we go through. That being said, we sold the business to Andy in 2018 and about that time, I always about ready to move on. I think I told Andy at the time that I probably had about 6 months left in the tank and was going to move on. And I can't tell you at that time, how energizing it was, for me, having stepped back for a couple of months and really looking and getting to know the team at Patrick, understanding the vision, the strategy that was in place, knowing that they were going to be very aggressive from an acquisitive standpoint, and I'll show you the history there. I really got energized and excited. So here I am fast forward almost 7 years later, and I think I'm working harder today than I have in a long time. But it's been a heck of a ride. It's been a lot of fun. The vision that's in place here at Patrick I think, is second to none in terms of what we're trying to do and what we're trying to drive in the industry. I want to start off, and this slide really represents talking about kind of where we've been. And when you think about the pandemic, I think you saw some of the charts where all of a sudden when the pandemic hit, people wanted to do things outdoors and started buying boats and RVs. And so you saw a huge spike during the pandemic. So at a time when we were pretty engaged in acquisitions, the business is really growing. And so we were really focused on that growth, and we're focused on taking care of our customers out there. And so during the last 18 months is we've seen this cycle turn on us and turn down. We started to focus on how do we optimize the group and collection of businesses that we have. So we've spent a lot of time in the last 18 months, optimizing how we look and what our business looks like today. And along with that, we've also invested in developing innovative products. Andy mentioned Advanced Product Group. You're going to hear more about that. But we think we've got a lot of good things in the works, and we think that as the business starts to turn with the things that we've done over the last 18 months, we're going to be in a great position to really accelerate and drive growth as this industry starts to rebound. What do we look like today? Roughly $600 million in revenues on a TTM basis. That accounts for about 16% of the revenue for Patrick Industries. And from 2019 through '24, about a 13% CAGR in revenue. One thing I wanted to mention on the right-hand side, you can see kind of our peak and 2022 and the dip in the market since then. But I think when you look at the number of units dropping down in the 140,000, 145,000 range, we've really kind of maintained and held pretty steady and actually grown some on the revenue side. The content per unit is more of an issue relative to a mix. We are very strong in the ski/wake market, in the pontoon market. Those 2 markets have been affected deeper than the market in general. So a mix has impacted our content per unit. We see that starting to change into this quarter and into the fourth quarter. So we've got a pretty good trajectory going forward and starting to make gains on our content per unit. Okay. This is what our portfolio development look like starting in 2016, as Andy had mentioned, with the acquisition of BH Electronics, through 2022, 2023, we've acquired 26 different businesses. And today, our portfolio consists of about 36 brands. So we've really -- over a pretty short period of time, really got aggressive in terms of putting this together. When we think about our capabilities and expertise, I guess the takeaway that I want you to have here is we cover a lot of ground when it comes to putting things on boats. And the next slide even shows that better. But significant list of what we do and how we position ourselves on boat and boats with our customers. We tend to be more highly engineered, and in a lot of cases, customized products specific to certain boat models, certain boat customers. So very good at what we do. And I think being more specialized and highly engineered is definitely a competitive advantage. I wanted to highlight just a couple of things on this long list here. A couple of years ago, we started to think about some greenfield opportunities that we looked at out there. One of them was carbon fiber. And so we launched the carbon fiber business with some expertise that we brought in-house and supported with a lot of the resources that we have. But we're trying to be a little bit disruptive in terms of offering things that aren't necessarily. You don't see a lot of carbon fiber on boats today. We're manufacturing components, and it's covering the gamut from saltwater fishing boats up through pontoon boats. And so we're finding a lot of opportunities and interest in carbon fiber components. The second one, you're going to hear a lot more about it from Jim Schultz earlier, but we also greenfield in the windshield business. Windshields have been pretty stale for a long time. And so we're using technology. We're using innovation to really go after and capture a big piece of the Windshield business. And you'll hear more from Jim a little bit later on that. Finally, aftermarket right now, I just wanted to make a quick mention there, that accounts for about 8% of our overall business in Marine and growing in tremendous focus. And once again, this is a slide that just kind of shows you the footprint and how we position ourselves on boats with the different components that we offer to our customers. You're going to hear a lot more, and you've heard about full solutions model and us being a full solutions provider. And so this concept and this company that we have called Marine Concepts, is state-of-the-art engineering, design, tooling, mold building capabilities in the marine industry, located in Sarasota, Florida. So we also, as part of that operation there, have developed a showroom where we can showcase all of our products with customers. Now why is that important? When a customer comes in to design a boat, whether he comes in, whether a design on a napkin or however we want to pursue it, we can take it all the way up with the staff that we have. And so -- so at that time, the design phase of a boat and a new boat is the best time to try and spec in components to that boat. You can engineer around different components that you offer. So we take a great deal of pride and effort into working with customers and looking at what opportunities we have, it's not a must deal for a customer. They have preferences, but we want to showcase what we have. We want to show them what we can do. We want to show them how we can integrate. What we do best is a full solution as they're developing their new boats. Another competitive advantage, I think that's important for us, and I've always believed this, is our proximity to customers -- you heard before, we want to get real sticky with customers. Like RV, Marine is a relationship business, always has been -- hasn't changed a lot in the 40-something years that I've been doing this. And so if you look at the map there, just quickly, you can see the shaded areas are where the main customer base is in the Marine business. And you can see our locations we're all over it. In fact, in some of our customers, we actually have some of our people embedded in our customers on a daily basis that really makes a difference and really puts us on the leading edge as things are developing to talk about products and really be able to talk about the entire Patrick portfolio as we think about it. And then finally, I've talked about most of these competitive advantages that I think we have. The one thing I did want to highlight was the seasoned team that we have. I just think it's a huge advantage in terms of trying to develop a Marine business through acquisition. To me, the biggest part of that is the talent acquisition that you make along with really good companies to produce really good products out there and the relationships that they bring to it. So we've got a fantastic team. A lot of it has come on board through our acquisition process. And I can't be more proud to be associated with the team that we have and the team that we have on the Marine side, you're going to meet more of them here today. And then the overall support from the whole Patrick team, just been a wonderful great experience for me is I'm kind of towards the end of my career, but anyway. And finally, on a TAM basis, we think we've got potentially 4 times over our current TAM as we kind of look over to the future and a lot of things that we have going on. So once again, I appreciate your time. And as I said, I love talking about the Marine business and what we do every day and look forward to further questions as we get into the Q&A. Thank you. At this time, I'd like to introduce Kip Ellis. One thing I love about Kip is he's a real team player. He just ordered a brand-new Malibu ski/wake boat. So we appreciate the help to Kip.

Yes. I've been a boater. I've had a wake and ski boat for a number of years, but I think it's a testament little bit the evolution of the innovation in the space. And so as I looked at what's out there with the current models, it's really impressive, so trigged by that, and it's great to be a part of that. So as Rick mentioned, my name is Kip Ellis. I'm President of Patrick's, Powersports technology and Housing end markets. And I've been with the organization since 2016, shortly after joining, I became the Chief Operating Officer of the company, and I served in that role until the first part of this year, where we shuffle things around a little bit internally and focused our business structurally on an end market basis. And so I've been in this role since that time. My background prior to that is engineering, a little bit of Tier 1 automotive early, early part of my career, I spent enough time in that in a couple of years to realize that part of Tier 1 automotive is the lack of the ability to impact dynamically a business in the market. And Jeff talked about relationships, and that's one of the things that in the specialty vehicle space and I have been in that space since -- been in particular, especially vehicle space, including RV and Marine and Powersports since that time, really kind of embraced that connectivity. We have the customers and the opportunity to really dynamic and pivot quickly and adapt. So more importantly, as Andy talked about, we're all enthusiasts. I'm certainly -- enthusiasts never regard I mentioned boating, but snowmobiling side by side. Anything he's got a throttle, happy to jump on and or punch an accelerator pedal. So with that, I'm excited to talk about Powersports. We're really excited with this being kind of the third leg of our outdoor enthusiast tool, something that we foundationally jumped into in earnest this year with the acquisition of Sportech. We think about this in terms of being outdoor enthusiasts and seeing consumers that are out and about that are RVing or boating, hunting, hiking, whatever the case may be, whatever do in outdoor activities, a lot of times you're going to find pieces from these different end markets that we serve. These are discretionary larger ticket type purchases, and these consumers are enthusiasts and they're really looking at differentiation and innovation. So the opportunity to participate in this for myself personally, is something that's incredibly exciting. It also really seems to align well with the evolution and maturation of our company. As we've moved from -- Andy talked about being a building component, a component supplier to the marketplace. Today, we're a solutions provider. The Powersports market inherently is looking for solutions, a very fragmented supply base. They're engineering-driven customers of ours, by and large, and so fits really well with where we are at this point as an organization. And again, tons of runway we see from an organic growth standpoint, and I'll get into that as well as on the M&A front. Just talking about our backdrop in this. So we talked about this launching of the Powersports platform this year, Sportech is a foundational piece that does cabin closures for the UTV space, predominantly, but also the sport and rec side of side-by-side, but predominantly UTV in earnest, we kind of stuck our toe in the water back in 2016 with the acquisition of an organization called the Progressive Group, which is a national rep and warehouse distribution organization serving the aftermarket for upfitters that are doing a lot, predominantly in the audio and electronic space. So it gave us a little bit of a touch. A lot of these dealers are crossovers, where they're involved in RVs, Marine and the like, and they're the folks that customers go to think about, okay, what do you want to do on an aftermarket basis. So that gave us a little touch of that. We pushed that more RV Marine as we kind of got that business rolling. 2022, again, solutions big brand, Rockford Fosgate, the acquisition, Rockford Fosgate has been kind of the off-road dirt oriented element of automotive with Jeeps and Broncos and the like. Harley's, but now Polaris, BRP, we've pushed them effectively into the RV space, really premium audio solutions are now providing the RV market as well as the Marine market. And then we've got Wet Sounds which is another premium brand in the space, which we've been successful in also looking across and over. So a nice opportunity to get touches with those customers and with Sportech coming in and being a foundational presence. I'll show you a little bit more about their product offering, but we have the opportunity where we touch effectively every manufacturer and customer in that space with a direct relationship. So trailing 12 months through Q3, it's about a $300 million segment of the business. We're going to annualize a little short of $400 million for a full year, keeping in mind, we acquired Sportech earlier in the year. It's about 8% of our revenue on a trailing 12-month basis, and we've seen good growth predominantly through M&A. We think about where we can take this, the total addressable market, we're comfortable looking at the M&A pipeline organically, where things are going, a $2 billion market that we see out there the opportunity for us to jump on. So from a capabilities and expertise, we think about this given everything we've built out in the RV marine space organically, our ability to work with metals to bending, fiberglass, thermoforming, thinking about those capabilities and then with what we've got with Sportech with the cabin closures, so they're doing the door systems, the windshields, the wipers, the roof, the back glass, the mirrors, there's a lot there in terms of crossover in the way of manufacturing capabilities. But we're excited about the thoughts of where we continue to work with these customers and where they want to take these. And they think about somebody getting out of their dressed up truck, pickup or jeep or whatever the case may be and once you're towing these units to the playground. And those creature comforts that they see within their automotive vehicles, they want to see in these units, and so we're at the forefront and working with customers on that. And so that capability, both from a manufacturing standpoint, but from an engineering connectivity standpoint is really a differentiator for us. And so I talked about some of the products just to kind of point these out. Powersports is coming a lot of different things, and we're active in a lot of different spaces. The UTV space within side-by-side is the largest segment. It's where Sportech has their heaviest presence, but we certainly are involved with other aspects of the market, our smaller scale. Harley-Davidson uses Rockford Fosgate audio exclusively and Anna will mention that in our marketing presentation about how that brand is leveraged. But good relationships, good connectivity. Really, the opportunity to kind of take ownership in some form of the cab segment of UTV is really what Sportech allowed us to do. And as we think about incorporating audio and other capabilities, heating and air conditioning is a driver for this. It's a differentiator. And so the mix continues to grow for where consumers are looking for the opportunity to put heat and air conditioning unit and you go and close a cap in order to do that. So I've talked about some of the innovation. We see continued growth potential. We think about within those cabs, the DASH systems, controls, the seatings. And as we've got into this, when we talked to these customers in depth about what do they want to do over the course of the next 3 to 4 years? What is it from an ownership standpoint, we can take to help them really focus on producing units. And we see RV can flex incredibly nimble. Marine is a little slower to flex, Powersports to volume trends is the slowest of the 3 in terms of their ability to flex when volume shifts so quickly. So that capability and mindset that we bring to the table with other business is something we're looking to bring to the table and show these customers. So a couple of wins noted there. One was an audio integrated roof, you'll see we've got a UTV down on the plaza that shows that with about 20 different speakers and it's pretty remarkable. So competitive advantages, just to summarize, customer relationships, good crossover connectivity, the big players in this space tend to be a Marine business as well as we think about BRP in the Marine space, Polaris with Bennington. So we see good crossover there. We're developing a customer relationship at depth. We've got a good step in with that. But really, innovation in advanced products is going to be the lifeblood for this. And we see continued opportunity, continue hunger and thirst for innovation from these OEMs, and we're excited to be a trusted partner in bringing those opportunities to the table as well as continue with our M&A mindset and looking at providing the opportunity for these folks to get the supply base maybe a little better under control. So $2 billion as I mentioned earlier. I said one of the other things I talked about, we are a data-driven organization. You see a bunch in here about content per unit that we've got on an RV or on a boat, we're digging into the data in the Powersports space. The data is probably the most difficult to come across to the 3 markets. We're beginning to make some inroads, but it's fragmented, some people don't register them in that. So there's a little bit of a differentiation you're seeing here, and we certainly note that. But we're beginning to make some inroads and we'll have a little better way of kind of capturing the successes that we're taking on here. So with that, I'm going to pivot to our housing end market and just gave a quick walk-through of a similar form of what's going on in the housing space. We were excited about that. So Andy talked about affordable housing in this country, the pent-up demand for affordable housing. It's not lost in anybody in this room, I'm sure, the availability of those homes, the inventory that's in space. We're about 50% manufactured housing and about 50% site built. The site built can be single-family or multifamily, but all within the affordable housing realm. So a lot of the finishings that go into a manufacturing home are similar to what you're going to see in some of the site-built homes now, certainly different paths to market in terms of how we're thinking about delivering product. We'll get into a little more detail on that. But the mystery of what it is that -- how the stars need to align for manufactured housing to really take off, given the demand is something that we've wrestled with over the last 10 to 15 years. And one of the things we're certainly seeing now the refinement in the manufactured homes that are being produced is creating a more attractive product for folks. And so today, the backlogs are strong. The demand is strong, the rate environment would lead you to believe that MH has got a good runway ahead of it. We'll see. But we'll tell you that we're entrenched and we'll continue to grow with it, and we'll talk about why that business is a good fit for us as well as what we do on the residential site build side. So about $1.2 billion, 31% of our revenue currently with strong CAGR. We're not M&A focused within the housing segment, as Andy had mentioned, this is really an organic push. And we've got the customer touches. We've got the geographical footprint to allow us to sit and be in front of these customers on a daily basis. And the fulfillment piece and allowing them to keep their inventories lean through that network allows us to do that. So continued steady growth on a content per unit basis. We use MH here as a proxy for that and good growth from a housing revenue in addition to the content per unit is going on as the markets balanced along a little bit here. Capabilities and expertise. This is a little bit more of a distribution-oriented business for us. Certainly a solid manufacturing presence as well. And I'll talk about some of the crossovers in RV here in a little bit. But really, finishing touches a lot of similar type product offerings that we have in the RV space and capabilities. We have some facilities that kind of cross over both is kind of where we're focused on thinking about what is it that we can kind of pump into this infrastructure have to serve these customers. And so we've got really strong vendor partnerships. I'll talk through here in a bit. But just kind of a quick rundown of what you see from a capabilities and expertise standpoint. And then from a component standpoint, in more detail, Jeff talked about everything you touch within an RV or [indiscernible] or what have you. In a lot of ways, that's the push and what we're trying to do from an MH standpoint. So a lot of those capabilities we've got on the manufacturing side, again, on the -- from an RV standpoint, we carry over to the housing sector. Long standing presence in this market. It's Patrick's earliest presence from the beginning of Patrick's founding. And then we've got strong long-term relationships also with all the key players. And so the Clayton Homes, the Skyline Champion, the Cavcos in the MH space, the Lennars, the KB Homes on the site-built homes. We do some big box work in some key geographies. We've got solid surface countertops, granite, courts countertop producers in the Denver area and up in the Northwest in Seattle, and we're in Southern California and Arizona. So bigger markets that are growing quickly is kind of where we're focused on an aftermarket refurb basis, if you will, with the Home Depots and that. So that's how that kind of plugs in addition to our national homebuilders where we do a lot through our businesses that are based out towards the western part of the country. Long-standing vendor partnerships, Rheem and Carrier, a couple of I'm drawing attention to here. The Department of Energy is providing credits to homebuilders for energy-efficient appliances. We're at the forefront of that and working with these vendor partners to bring that into the manufactured housing realm. Nice high-ticket pieces for us, good pull-through, given some of the incentives that are out there for these homebuilders to include them and certainly a differentiator they start to talk about the benefits of their product versus some of the others that are out there. So USG is one, I certainly want to mention as well, The United States Gypsum. We are a long-standing partner of theirs, been a terrific partner to work with in serving in image market. So excited about that position we carry as well. Lean fixed cost model and scalable operational structure. So this is one of the diversity element and the relative stability that we've seen in our housing business this year, in particular, is something that has served the organization well. And these are lean models, you got a little bit of maintenance CapEx, but not much really in terms of expensive capital for equipment and what have your facilities. And then we're very lean kind of thinking, we're more bolt-on oriented from an M&A standpoint with these businesses. So not a ton of activity in that regard, but high variable cost businesses gives us the opportunity to flex and they generate a good deal of free cash flow for us to help kind of deploy kind of along the lines of what you'll see, what Andy talked a little bit and what the other Andy will talk about in terms of our deployment model. So that's a key piece of this. And the other side of it is the capacity utilization opportunity that we have with our RV facilities. And so 40% of our Patrick businesses sell into both RV and housing. If you think about an RVs in the simplest terms, a box on a frame going down the production line and manufactured home is the same thing. And so as we think about fulfillment and working with them, the ability for us to use capacity in our facilities to serve both markets and pivot in a dynamic quick manner, which our businesses are expert doing, really serves the organization well and gives us a competitive advantage in the marketplace. So last slide here, competitive advantages. I've talked about the long-standing customer relationships. Just like Rick, I want to talk about the experience and seasoned team. These folks are passionate. You don't hear a lot about housing from Patrick, but these are some of the longest-standing team members we've got within our organization. We've got people that have had as much as 40- and 50-year track records that are still working within our organization serving the housing market, so their enthusiasts, their passion as well, and it's something that we -- I want to recognize and certainly speak to. And then the other piece is just the geography, and Rick touched on it on the Marine side. We have an infrastructure that we can pump products in, continue to think about organically growing. It's relatively inexpensive for us to think about, okay, another item on a truck that's already going somewhere. And so it gives us a key competitive, we see an opportunity to nearly double given the expertise and capabilities we got now double our content from a total addressable market standpoint. So with that, I believe we're going to slide in some Q&A. And Steve, I think you're going to facilitate Okay.

So we do about 10 minutes of Q&A, we'll take about a 10-minute break. So I'll have Meg and Emilia, you have mics bring over to you if you could ask one question and then give the mic back that would be great. Just identify yourself and your firm and we can start with Dan first.

Dan Moore, CJS Securities. In terms of where we're going from here, I think you're targeting $400 million to $500 million annualized acquisitions potentially. Obviously, some years will be higher some years will be lower, just given your can scale talk about maybe a top end size when you go up to [indiscernible].

Sure. So I'll talk a little bit about deal pipeline a little bit, but we've got more deal pipeline potential than we have capital to deploy over the next 5 years and as it relates to kind of deal size, I will tell you today that the $50 million to $75 million deal is kind of in our sweet spot. I'm talking about kind of a one-to-one revenue to purchase price, if you just want to think about it based on accretive margins and how we think about the model. Probably not likely to do a $1 billion deal. I would tell you, $350 million to $450 million is kind of the top end of where we see today, would we flex that a little bit for the right deal? Yes, we would. And there is some deal potential out there that exceeds that, but we're going to stay fairly disciplined to the model. Like I said, we maintain the 2.25 to 2.5x leverage. We will flex that up to 3x if we need to, maybe a little 3.1x. But the intent would be that we bring that back down to the 2.25 to 2.5x within 2 to 3 quarters. So we would immediately shift and pivot and focus to get back to that leverage fairway is how we think about it. But on the larger end of the deal, $300 million, $400 million is top end of how we think about it, just in general.

And in terms of the opportunity funnel, is there a rank ordering those [indiscernible]?

The largest piece of the pipeline today is going to be in Marine and Powersports. So that's where the majority of the candidates are at. We still have RV runway, though. So in each of our markets, we've identified that pipeline. But I would tell you that's probably our focus as it relates to prioritization. That being said, because of the pipeline flow that we have, we have the ability to prioritize across those 3 platforms based on return models and what makes the most sense at the right time. But just in general, if you were asking probably Powersports and Marine is where we look to go first.

This is Craig Kennison from Baird. A question on RecPro, how do you avoid potential channel conflicts with any of your OEM partners as you try to expand in an aftermarket they may see as their opportunity as well?

Jeff, will you do that?

Yes. I mean. Really, I would tell you that on the aftermarket side, where we see our OEMs kind of pushing the product through is into the dealers. RecPro, their primary function is direct to consumer, right? We're using the e-commerce platform that we have out there to take the products from Patrick, whether it's the RV, Marine and get that directly to the consumer where we don't see a lot of that activity where our customers are trying to work right direct with the consumer. They're going through their dealer network. We still are going to use that dealer network as well, but we're going to be very careful to make sure that we're working with our OEM partners that we're not stepping on them when we're going into that dealer channel. So it's a little bit different. What I will tell you is that we've been very careful to look at all the distribution of our product out there. And we're finding out that a lot of distributors will take our products and they'll get that direct-to-consumer margin -- and really, they're not doing anything. So we're going to try to clean that up and clean our brands up on the e-commerce side.

On to Scott.

Scott Stember with ROTH MKM. On the aftermarket side, could you just give us an indication of how much higher aftermarket margins are versus OEM? And then where do you see, I guess, break fix versus attachment rate business over the 5-year period that you talked about. I think you said 10% to 15% of sales or 15-plus percent. Where do you see that at that point?

Sure. So on the margin profile, RecPro is an accretive margin business for us, both at the gross and operating margin level is what I can tell you -- and we do see stronger -- if you're just going to size it up against OE, I'd tell you that it's going to be a higher -- certainly higher gross margin and accretive margin, but not as much. There's a lot of SG&A OpEx that go into the aftermarket. So that's where you see the most of the expenses. And that's what you're going to see in our P&L is below the line or below the gross margin line is you'll see -- we'll see a little bit tick in OpEx because of aftermarket. And then as far as attachment versus brake fix, a lot more attachment versus break fix at this point is what I'd say. But as we, again, look across the platform and the opportunity that's there, that should equalize out over that period of time to be about 50-50 is what I could tell you today and based on our kind of vision and where we see it going. We're still identifying those opportunities, again, that we have in our existing organic products.

We will go to Tristan.

Tristan Thomas-Martin, BMO Capital Markets. Can you just bridge some of your content TAM forecast? How do we get there from where you are now?

How do we get to the TAM?

Like as a product? Are you introducing new products? Is it M&A?

It's going to -- so it's going to be a combination of the organic growth targets that we put out there. So again, we target our businesses with 2% to 3% organic on an annual basis, and then the rest is going to be M&A to deliver upon that. And just I'll jump a little bit into M&A. We've got 3 or 4 or 4 or 5 competitors in every product category in each of our outdoor enthusiast markets. And so we -- our acquisition model is fairly simple in that we look to enter space, a product category with meaningful market share and then in its simplest form from a consolidation strategy, we look to buy 4 of the 5 competitors and leave 1 out there. And we don't want to be -- our OEM partners do not like to be single sourced, and our goal is not to take away the market from them, and so we want competition in the marketplace. We just expect to be the best at it and be able to leverage it. And so we're at various stages of that evolution in various product categories and certain product categories. We might have 80% of the market today. In the other product categories, we might be at 20%. So that TAM has a combination of both that organic and strategic component to it.

And just one thing I'd add to that is our teams have done a really deep dive across all of our current product categories to understand our market share and content per unit by customer and been able to take all that data and fold that into a really good understanding of where we think our targets are and how we target our business out, and that gives us a good idea of what that TAM is.

Joe?

Joe Altobello, Raymond James. I wanted to talk about some of the synergies that you guys see between your different end markets. I know I was thinking RVs, it's fairly obvious, but maybe help us understand where Marine and Powersports play either on CPU or maybe even on cost synergies?

Certainly. On Powersports today, from a manufacturing perspective, we do in our existing businesses, a lot of the production opportunities that are in Sportech today. So we do roto molding all in thermoforming, acrylics, to bending harnesses and panels. And so we do that across our platform today. So from a best practices perspective and synergy opportunity across our other platforms, there's a ton of opportunity there. As it relates to product opportunities, there's significant opportunity as well. So a simple example is the Sportech product, which is a cabin closure, as Kip mentioned, over the ATVs and UTVs. We do audio systems, so we can do a roof, we can incorporate a panel, we can incorporate a wire harness into that. We can incorporate actuators and things like that, that can do some moving parts inside there to be able to bring more solutions model together. So it's not only -- so we can incorporate our existing products into the aftermarket platform -- or I'm sorry, the Powersports platform that we have today, but as well we can go vice versa. And some of our customers have even asked us to bring RecPro -- sorry, I get a little bit there tied up, Sportech to them as an alternative or option when we're quoting other marine products today. So because of Sportech's capabilities in the thermoforming and roto molding opportunity, they said, "Hey, we'd like to see what Sportech brings as well as your existing brands that bring those to light." So a lot of crossover, Marine and Powersports, in particular, but I'd also tell you, even our capabilities in Marine can crossover into the RV market today, especially with some of the things that we're doing from a billet manufacturing perspective in fabrication perspective, audio, like I mentioned, CDEC is a well-known product that we have today, that's a nonskid flooring that has applications in just about any market that we're taking into RVs for RV steps and RV flooring. So a lot of crossover between the outdoor enthusiast markets.

And I'll just add, input cost is certainly another key aspect of that. We've got these teams talking on what we term kind of early stages in nonstrategic basis to say, hey, where can we take the opportunity where we're buying sheet plastic and resins and fiber glass and what have you and think about it's less of an end market focused effort as much as something can crossover each of them, so Sportech is kind of been stepping into that. We've made a point of trying to get them established and exposed to the rest of our businesses where they've got like components that are coming in and then they've got certainly a network. We've got a network across Asia from a sourcing standpoint as well, where these teams are working together to leverage that and be effective.

Time maybe for one more, Alex, on the front here.

Alex Perry from Bank of America. Why -- my question was why downsize the housing penetration is pertaining to the total business going forward. Is it just that you find the RV, Marine and Powersports end markets to be more attractive end markets from an organic basis? Or is it due to the acquisition opportunities in those outdoor enthusiast end markets?

It's the acquisition opportunities in the outdoor enthusiast. So we're not downsizing housing. It's a more commoditized product. It's higher distribution content for us. It's a super leverageable business that generates a ton of cash flow that we're going to redeploy into the enthusiast market. But from a strategic perspective, I'll just tell you the candidates out there for M&A are not margin accretive. And it's one of the boxes that we look to check is margin accretion. Strength of teams and all this other stuff will go into. But you are talking 5% or 7% EBITDA businesses, right? Today, that's not something that we're really attracted to when we can look at 13% to 15% EBITDA businesses and the other outdoor enthusiast space is kind of how we think in simplest form.

We'll go one more. Mike?

Mike Swartz, Truist Securities. And that was a perfect lead into my question, which is over this 3- to 5-year planning horizon, you're talking about your enthusiast end market mix picking up your aftermarket mix. What are the implications on margins if you achieve those targets within that time frame?

We're going to show you what that trajectory looks like at certain volumes here in an upcoming slide that Andy is going to talk about, Mike, but we look to continue to deliver accretive margins above and beyond our historical high margin that we achieved from an operating margin perspective. So we'll show you a grid here just in a little bit later that -- in the Andy section, if that's okay.

All right. We'll take a break now for about 10 minutes, and then we'll resume. [Break]

So we're going to get started with the second half here. Thanks, Ben. So as we kick off the second half, I'll just give you a quick refresher on who we're going to bring up. We have Hugo Gonzalez, our Chief Operating Officer; Jim Schutz who is heading up the APG group; Anna Parker, who will talk about marketing and empowering enthusiasts. And then Todd will talk about our better together culture, followed by Andy Roeder will cover financials. And then Andy will give a quick recap. So just a quick intro on Hugo. Hugo has been with Patrick. I think almost as long as Andy Nemeth's about 18 years, started on the floor of the facilities, and he's worked his way up to Chief Operating Officer level over the years. So with that, I'll turn it over to Hugo.

Good morning, everyone. My name is Hugo Gonzalez. Thank you for the opportunity to be here with you guys. I function as the Chief Operating Officer, as Steve mentioned. And I am going to have an opportunity to try to explain a little bit about our operational structure how it works, how we get those synergies as Kip and Andy were talking when Joe was asking about that and how we create those bridges. We're going to talk about the simplicity of our scorecard. And that fair way that we allow the brands and entrepreneurs that come to join Patrick to perform with. And at the end, I'm going to talk a little bit about our capital deployment and how we utilize it to not only maintain or enhance our operations. For me, everything has started 18 years ago, maybe not as many as Andy. But I started a shop floor. I didn't know anything about manufacturing when I started. And it's been a great right, learn a lot from a lot of people. We have a fantastic team, and I was able to pick up a lot of what we do and how we do it. I came through Adorn, as Andy mentioned, one of the largest acquisition merger at that time. And I was in the lamination facility where I started. Right away when we were acquired, I noticed how easy it was to work because Patrick didn't interfere on anything that we were doing that has allowed us to perform right away, I notice how our executive team started walking through the facilities and just giving us guidance, correct. I was participating in some of the walk-throughs and giving us guidance on where we were heading, what were some of the options for improvements and keep guiding us through that. The other thing that I noticed right away, it was the capital deployed into Adorn that probably helped us accelerate our growth right away. I became the manager of that facility that now as a consolidated Patrick, we are the largest laminator in the United States, which is usually not known, but we produced the most laminated panels on the entire country through different facilities, not just Adorn, but through some of our acquisitions. I noticed through reviews, the financial reviews, again, that guidance without being forceful, correct, just aligning to those objectives that the organization had for us to perform so the organization delivered results. Eventually became Director, Vice President and now the Chief Operating Officer, and he's extremely excited to now be part of creating those boundaries. The fairway where our entrepreneurs work, but more importantly, as you guys were discussing during the Q&A, create the bridges in between our facilities, not just in one end market, but across all the markets and working with all of our facilities to be able to deliver better performance. I have [indiscernible] try to explain what is our operational structure, correct? Very decentralized, but how do we make it all work together? I wouldn't be fair if I don't start with safety, correct, operations guy, right away. The most important part that you need to do is to create the right environment for your teams to perform, correct? And safety is always going to be a priority for us. We are going to be creating an environment where we empower the experts, those brand owners, those brand experts in their different commodities to continue exploring and innovating for the customers. They come and bring the exact same passion that they had when they were the owners of that organization to Patrick, and it is exponential. As you guys have heard through the different presentations of the end markets, it's a very agile model, and extremely cost efficient. Another competitive advantage as the presence of the end markets, we're discussing some in markets that go up and down cyclically, correct? We can grow op and we demonstrated that when RV industry went from that 400,000 unit to a 700,000 unit pace that we had during COVID or marine also catapulting 30%, 40% production during COVID and then reducing it by 50% and gaining market share through that, correct? And everything is empowered by Patrick. You are going to hear Anna, later on, talking about our marketing strategy, but it is really not just a [indiscernible] strategy, it's how we create a foundation for our operations teams to perform even better than what they did before coming to Patrick as a strong brands that they were before. Who are we? We are our people, correct? That's the backbone of who we are, 10,000 employees, over 6,000 of them direct labor employees, teammates that work and collaborate to make all this happen. We have talked about our 86 brands. And we do it across over 250 facilities, most of them manufacturing sites and then the distribution centers. And we have a vast network of vehicles that are ready to deliver anywhere in the country, in the pockets where all of our OEMs and customers are. I always think about our customer service and the 1,000 vehicles come handy, correct? Because who do they call when they need something? They call Patrick. They know our network. If they -- even if we're not selling them that product, but they know that we have it, they're going to call one of our brands, and we're going to get them connected and we can deliver. It couldn't be -- all these -- putting together all these people couldn't happen without a foundational culture, correct? And you guys are going to hear from Todd Gongwer later on in our Better Together culture. The culture that allows to set a foundation for all of our brands to thrive in their own independent cultures across Patrick. But how do we measure performance? Simple. Fuel, key metrics, score card, we call it, that we give every year, part of the scorecard is 3% market growth every year for all of our brands, and then we have different operational goals for everybody that align with our organizational strategic objectives. And as long as you align through those metrics, there is that fairway to play and continue innovating as an entrepreneurial brand owner than many of our facility directors were. Again, safety, investment and programs, capital deployment. We have decreased 53% of our severity rate this year and 13% of our lost time cases. In essence, a focus on decreasing the severity of an injury. So not only focusing on decreasing the injuries, but investing into our teams and our equipment and facilities to decrease that severity of an injury. [indiscernible] So I want to highlight a lot of automation and the full solution model is part of our investment and how we deploy capital, process improvement and harnessing robotics. I'm going to try to speed this up. And I'm going to talk about 3 different of our brands, just to highlight some of what we do when we deploy capital. As Andy Nemeth and Andrew Roeder will mention later, part of our capital deployment, about 1/3 of what we do is investing back in the business, infrastructure and everything, maintenance, facilities, equipment. But then we develop solutions for our customers, and we're going to look at some of the robotics and automation that we do. Gravure Ink is the leading PVC rotogravure printer of the industry. All the decorative prints of the units inside are made, not all of them, the largest portion from Gravure and the customers wanted to get a solution to all of the woodgrains that usually came from overseas, tying a lot of cash and with long lead times, 12 to 18 weeks. Gravure Ink, with their experience in the designs, step up to the picture with Patrick's Capital and invested in a state-of-the-art machine that now is producing those products in our right there near [indiscernible]. Another example is Frontline. Frontline is a top tub and shower manufacturer in the region, all the Midwest Northern region. And they -- through an acquisition that we had, they look at a monorail system that from handling all these tubs manually, applying gel, fiberglass to an automated monorail system that increased productivity, efficiency, safety and decreased 33% our labor need on that particular facility, increasing their capacity, and they are selling even in further regions. North American Forest Products is a softwood mill and a truss manufacturer. So they will do all the trusses for the RV, for their roofs and ceilings. And they also are going to the manufactured housing but they completely redefine how to manufacture this process through, again, another capital deployment. What used to be completely manual, jigs where you need to put all these trusses for bending them and doing them after they mill all the softwoods, now is completely automated, nobody touches the product from start to finish and is producing the most trusses for the industry, 15x faster, safe and efficient. So again, we continue focusing on all that capital deployment but a lot of what we do, we do it in trying to enhance that solution -- full solution model. Our entrepreneurs kind of get us there through extensions of our products, their own innovations. Through acquisitions, we create certain innovations, but the focus started a couple to a few years ago. And again, you will meet Jim Schultz here in a second, Founder of Geremarie, one of the most automated facilities in the United States that is leading our advanced product group and our advanced product group is focusing on what is next that is going to disrupt our industries on top of some of the creations. So Jim is going to tell you how we're transforming the industry one solution at a time.

Good morning. My name is Jim Schultz, VP of Operations for Patrick. We're going to talk about the Advanced Product Group here this morning. And -- but before we do that, I am going to just give you a little bit of background on Geremarie Corporation. Geremarie founded back 27 years ago. And it's set off to be a CNC machining manufacturer. But what we're -- what the true core what was in our wheelhouse was, we're not a component provider. We're an innovator. We're a designer. We don't have a catalog of component parts to where you just pick from a catalog and pick. We're going to work with each and every individual customer out there and build components that fit for their brands. Video will show you some of the automation. The automation is world class. People talk about world class as truly state-of-the-art. It's 250,000 square feet, fully robotic, the entire process from material movements to all, the entire manufacturing process to even in the inventory control, anodizing, finishing is 100% automated. To give you an idea of the level of capacity. Geremarie has got about 160 fully automated CNCs throughout. If you were to do the same capacity and did it more old school as most of our competitors would, that 160 machines will have to be close to 700, 800 machines. We run the entire facility with less than 200 people. The competitor would need over 600, 700 people to do the same thing we can do. Another just fun fact is we have the capacity to run 84 hours full production lights out, nobody in the building. So it's truly, truly a site to see. So as we were developing, as I was acquired, I was acquired 4 years ago, our team was rather from Patrick. And the one thing we noticed in our model like Geremarie, we really concentrated on what we do -- what we did well was machining aluminum parts and building assemblies, but really wasn't focused on what were the other opportunities out there in the marketplace. So when we were acquired, we realized the reach that we had, not only through marine, but through RV, power sports, the whole gamut. We've been talking about the full solution, but what does that full solution really mean? So when we're building that product for that customer, you -- there's -- if you look at the boat that's out in the parking lot there, you got the tower on the top. Now that tower we would create and we would build for that customer. But we won't worry about the cut and sew, we won't worry about the audio system, we won't worry about the wiring harness systems. We just worry about what was in our core wheelhouse. But with the relationships and the partnership and being part of the Patrick family, now we bring that all as a complete full solution to the customer. So it builds an unbelievable relationship because you're just -- you're making it easy to do business with us. So that was the basic scope of Geremarie. And really, the APG team, the Advanced Product Group, isn't just an extension of Geremarie to be able to bring that out to the entire family and all of the Patrick customers. So there's 3 basic revenue streams that we look at customer-specific. What we mean by customer-specific is we're going to work with their teams. We're going to come up with our own ideas and we're going to go to our partners, our customers and work with their DNA. What -- it looks like just an extension of what they do. When we develop those parts for those customers, they're only their parts. We're not going to develop a part for that OEM and then go sell it to another OEM. It's their DNA, it's their part. It just absolutely strengthens relationships when you have that type of trust with your customers. And then Disruptive for All. Now Disruptive for All is our products that the design cycle and something like that could be a year, it could be 3 years or longer. These are truly, truly disruptive products in the marketplace that is going to be -- that's going to change the industry, and we're working on several of them at the moment. And then the aftermarket solution, you heard about our incentive to push out on growing our aftermarket, and it's the same working on different creative innovative innovations that don't exist today. So now the development cycle, when we say discover, how do we discover? A lot of people would take a group of people, 10, going to think tank and we're going to think about a bunch of ideas. We approach it differently. And a great example is last year at the Miami Boat Show, we took the entire advanced product team to Miami. There was about 10 of us. 5 full days from the moment the show opened to the moment the show ended, we were there every single minute and we literally walked the entire booth, the booths, the slips, met with every single OEM and viewed every single boat. And our task, our mission was to come up with 3 new innovative products for every single OEM regardless if they were our customer or not. So with that, once come back, power of that is even if they're not our customers to walk -- to come up to a potential new customer and come with the engineering and some designs, some conceptual ideas of what was possible for their DNA, it just -- it's amazing how easy it opens up doors and builds relationships and partnerships. So then the design, the develop and the deliver, that's mostly your typical engineering -- your engineering cycle. We get into the conceptual design to drawings. We get into obviously, all the CAD will develop our prototypes and then we release out to our business units through our release teams. So some -- we'll get into some of the products here. GereGlass. Now this is listening to our customers, the best opportunities that are out there -- just listening, listening to what people need, what are the challenges our customers are having. I've been in it for 27 years now in the marine industry. And one thing we've always seen throughout was, you look at a boat, you look at it, I don't care, it's a $50,000 boat or a $1 million boat, you look at the integration of windshields on boats. I really think it was something -- it was a big opportunity, a big hole in the market because what was out there, you look at the product, and it looked like it was an afterthought. It looked like what I call it an erector set. You saw all the fasteners, you saw the skis. It didn't look integrated. It didn't look engineered, it looked like a complete afterthought. So we set off and we started GereGlass. GereGlass is up in the Chicago area, 50,000 square feet, and we are truly bringing innovative engineered products that looks like it should bolt on the boat, and we're locking up a lot of IP along with the product. NTXT. Now this is through the RV group. This was one of the bigger developments that we did. It was a 3-year development. And that was, again, listening to our customers and understanding that there was a capacity issue. There was a quality issue. There was challenges on the production floor and the ease of installation of the previous product. So we addressed all of those challenges and then we introduced NTXT, which has been extremely successful. And then finally, we spoke -- touch on a little bit, we talked about SeaDek. SeaDek is a flooring company that was very broad in RV -- rather in the marine industry. But we cross-branded it and we got it up into the RV guys, and we're entering with a new SeaDek -- with a new SeaDek flooring, which has been very, very, very well received. So with that, I will give you, Andy. Thank you.

[indiscernible] talk about why we feel like we are an acquirer of choice in the markets that we play in today. And it's a very thoughtful and dedicated strategy that we've stayed very disciplined to. And I believe that we've created a culture in the marketplace as it relates to the acquisition candidates that we look to pursue. And it takes a lot of focus, but it's something that I believe we've identified ourselves in the space as an acquirer of that, the business partners that we look to want to come to Patrick because of the opportunities that exist for them to stay on and run the business. And I'll talk about why I think that makes sense. First and foremost, as I mentioned, we're going to keep a brand fronted strategy in the marketplace. So we want to go to market through the brands. That's what the customers associate with and the brands and our competitors in that -- so I talked about 4 or 5 competitors every product category. They live and breathe the brand. Many of them develop the brand from start in their garages. They love to wear the brand jersey. We don't want to take that away. We just asked that they put a Patrick patch on the sleeve and that's all we want them to do and we want to equip them with the resources to be able to be very, very competitive. We are a plug-and-play acquirer. We like successful businesses. We don't like fixer uppers. We stay -- we run very lean. We want brand expertise with successful business models. And we also want -- we want to fit within our culture and our values. And it's really that simple. We want enthusiasts in the space, brand entrepreneurs and teams that are passionate about what they do and passionate about wearing that brand jersey. And that's something as it relates to our plug-and-play strategy that fits very, very well and makes a compelling landing zone for a lot of these players in the space today. At the end of the day, the value proposition is pretty simple. We allow a successful business entrepreneur to monetize their investment and then stay on and run the business and participate in the profitability of that business on a go-forward basis. And a lot of people will say, okay, well, what happens? These entrepreneurs get this big pot of money? And then why would they want to stay? They just want to leave. Well, that's not what motivates the brands and targets that we're looking at. These individuals that we look at as part of our diligence process are motivated by all the things that were motivated by as enthusiasts and taking care of our customers and passion about their brands, caring about their teams, running a successful business. That's what motivates them and energizes them every day. What I'd tell you is, yes, they get a big pot of money at the end of the day at closing, but they basically set that aside. And then it's all about what am I doing going forward? How am I incentivized? How am I motivated and what is my mission on a go-forward basis? And that's how they think about it. So that has been successful for us, and it's been something that we, again, continue to look to replicate. What do we look for? We look for strong management teams. We look for successful business models. We look for innovative product lines, strong customer relationships and then accretive margins, okay? It's really that simple. Those are box checks for us when we're looking at any M&A candidate out there. When we look at kind of deal multiples, just so you have a feel and the standard fairway, and this varies a little bit, based on the margin profile. But in the RV space, we're generally going to pay 5x to 6x trailing 12 EBITDA, 5x, 6.5x. And then in the marine and power sports space, we're generally going to pay 6x to 7.5x. We will flex that depending on, again, the value proposition, the strength of the box checks, the return on investment that we see. And so -- but again, we try to stay disciplined within that fairway and deliver that value proposition. We look for margin accretion. We look for synergies. So within the first 12 to 18 months, we look to get a turn of EBITDA out of these businesses. We absolutely want succession planning. So as we're looking at the businesses, again, we're plug-and-play. We're not looking for an owner that's looking to leave a business or just wants to retire and turn it over to us. We want to ensure that the management team is going to continue to do what they do best and continue to be successful. We want to leverage best practices. I'll tell you it takes 6 months for these businesses to get comfortable that we're going to allow them to run. And then what we find is we find them turning to us as it relates to the menu offering of opportunities that Patrick can provide and the resources that Patrick can provide. And Andrew is going to talk a little bit about that. And again, as I mentioned earlier in the day, don't fix what's not broken. And that's harder than you think it is to stay tuned to because you're always looking and noticing things that are different, but we really try to stay disciplined to allowing the entrepreneurial spirit to run free. So with that, Andrea Williams is going to come up. She's our VP of Finance in our Marine group, but Andrea has been a big part of the M&A platform for us for many years in executing on not only diligence but really working with the teams to ensure an integration, not only we work a lot really hard upfront for our post-closing opportunity with in developing relationships, and Andrea works hand-in-hand with our acquisition candidates. She's going to talk a little bit about how that process works.

Thank you. So again, I'm Andrea. I've worked with Patrick since 2015. I have been given the opportunity over the last 10 years to have a role that kind of do a purpose, serving on their acquisition strategy and execution of that and then also our diversification and building in our marine portfolio. So one thing that's unusual about Patrick, is we don't have a dedicated M&A team that specifically just does M&A. We have a consistent team that does and supports our M&A strategy. And again, I get to be a part of that. So starting with that, I do want to highlight some of the items that make us -- differentiate us in our acquisition execution. The first being our dual service, due diligence. So we diligence transactions with integration in mind. We're focused on both, obviously, confirmatory diligence actions, but also prepping for onboarding post closing. Second, each of our deals are assigned a deal champion. So there are functional work stream leads that diligence their respective areas, but this due diligence champion aligns all of them and make sure any risks that are identified or scenario changes or synergies are built in the core financial model that is also reviewed with the executive team. And then finally, all of our deals are signed off by the executive team before they close. So we review the findings report in the synergy considerations, the onboarding plans, the financial model and targets before we consummate the transaction. As we advance to the onboarding and synergy stage, we truly allow our better together mindset to come through with this to drive value and scalability in the organization. So from our full solutions model and revenue synergies across markets, across customers, this is where it really starts to take hold. Also, our strategic sourcing efforts and leveraging our buying powers in certain like products, we're able to do that. And then capacity alignment would be the other strategic effort that we do, having good, better, best products, we're able to utilize capacity and optimize that with our customers' demand. And then from an administrative and supportive standpoint, obviously, we support with financial reporting efforts, legal efforts, insurance efforts and what have you for resource and from a savings perspective. The 3 main principles that I think are difference makers for how successful our M&A strategy has been is, again, a consistent leadership team. So as a deal champion, myself, I've got to work on all 25 of our marine acquisitions and not only do I get to meet with the sellers pre-closing and as we're diligencing, but I get to work with them post closing. So those are the people I work with every single day. And so I've been able to build trust with those folks and keep that at the forefront of our relationship within the organization. Secondly, the modular playbook that we function off of has been built year after year and has a continuous improvement mindset that we're constantly working to make this better, make it more effective. We don't want to pour through reams of paper on the diligence perspective, we want to be extremely precise on what we discuss and assess. And then delivering on performance expectations. So throughout the transaction and leading up to finalization of it, we spend the time with the target to align on financial and strategic goals and as Hugo mentioned what the guidelines are going to look like, just so that we ensure there's not surprises post-closing, and that each party feels comfortable as that eases our transition once we close the transaction. How we measure our success of our investment performance with acquisitions? So Andy outlined the base multiple in general for you by end market. From a post-acquisition perspective, within the short term, so under 3 years, we, on average, have seen a 1x to 2x improvement of that multiple since closing. And greater than 3 years after close, the effective multiple is around 3x lower as our historical average. And obviously, we've got some deals above and below that. So Indiana Transport, for example, has more than doubled their revenue since acquisition, and so they would be above that. Transhield, more recently at the end of '22, protective covers for the marine industry is what they manufacture and produce, they are on par to hit these averages despite the market cyclicality as we've worked on revenue synergies and cost synergies within that brand. And we expect RecPro and Sportech to be in alignment with our historical averages and performance as well. So wrapping up, M&A has been a core piece of our business and will continue to be a core piece of our business going forward. And we believe that empowering these brands and empowering our team has led to financial performance, operational performance, and we're excited to continue to drive that. So with that, I'll hand it over to the architect of our empowering brand, Anna Parker.

Good afternoon, everybody. We really appreciate you spending a good chunk of your day with us. I'm here to kick off the home stretch. We've got just a few more chapters of our story to share with you today. I'm excited to hit on marketing. Todd is going to introduce you to our culture. And then you'll get really insightful financial data and our outlook from Andy. I'm one of the newer Patrick team members that you'll hear from today. I joined the team just over 2 years ago. I'm not new to brand building or marketing. I spent my career to date, last 17 years or so on the agency side, and I worked for a number of global creative and media networks during that time and was most recently the Chief Strategy Officer for an agency in Chicago. And then right at the beginning of the pandemic, we became parents, and we left the city and moved back to my hometown. I wanted to raise our daughter in our family. And that hometown just happens to be in Elkhart County, Indiana, RV capital of the world, and headquarters of Patrick and in a lot of ways, it really is the heartbeat of outdoor recreation manufacturing in America. So it's funny, I was -- before meeting the team, I was like most people outside this room, I didn't know who the company was or really what it stood for. And it's funny because here's a brand that between 2009 and 2016 was the fastest-growing stock in America. I think a lot of people would be surprised to know how many times we've been named to Fortune 1000 list or a number of others. In 2017, we beat out Netflix for the top spot in one of the industry week's 50 best companies list. So it really is an incredible story about performance. And I'd say if there's one thing that I've really taken away from my career experience is that I think some of the most exciting brands to build and grow and those with the most potential are those that have just awesome unknown stories that deserve to be told and that is so true about a brand like Patrick. So you've already heard a few shout-outs from -- on a couple of brands today, I thought I'd hit in my first year of the company and just being immersed in the brands and all the business units, I saw the world's first installation at our Better Way brand in Indiana. The world's first installation of these dual autonomous robots that work collaboratively guided by AI to scan and send exterior components for RVs. So just incredible stories of innovation. Jim talked about Geremarie, Kip teed up Rockford Fosgate, talk about such a purpose-driven brand in Tempe, Arizona. It's a brand that has such strong customer attachment. You have people with tattoos of the logo. And it's a brand that a discerning OEM like Harley-Davidson, it's one of the only brands they'll ever allow on that bike. You'll see the tire brand. You'll see the Harley badge of course, and you'll see Rockford Fosgate branded speaker. Just some incredible stories, but again, a little bit of an unknown story. I think for the last few years, Patrick has been more of a quiet company. We -- as we come from humble routes, it doesn't feel natural always to tout our successes. But we really realize that I think there's a bigger story to be told. And when you think about all the activity and achievements across our network of brands, it really is a whole that is greater than the sum of its parts, and we knew that we needed to tell that story in a new way. And so I really feel like this team has risen to the challenge of thinking about how do we build the Patrick brand and raise our profile, but let's do it in a way that's true to us, meaning as Andy said, like we want our business units, we want their logo on the front of the jersey and we want the Patrick patch on the sleeve, and we want them to be prouder than ever to wear it. So our -- we run essentially a spotlight strategy. We are doing a more professional job than ever of shining a spotlight on the stories, the achievements, the people and the products and the business units that we empower. And that's what's building our credibility as a brand. And I think that's really been a great unlock for the business. So in my last few minutes, that's what I brought to show you today is just a few examples of some of our marketing work and the impact that it's having. I'll show you a bit of brand work. A couple of examples of how we're supporting our business units. And then just close with just why we're so excited about the next few years in outdoor recreation. So you'll see some visuals, but just to call out a couple of points. We are -- our story is earning national media coverage. You might have seen some yesterday, you'll see more today. We're also getting great coverage in the trade press. People are writing up about our presence at shows like Ibex. They're talking about our innovations. And people are picking up the phone and calling our businesses as a result, that's what matters, right? We've been more consistent in engaging on social media than ever, the most engaging content the brand has ever seen. We've grown our community there with literally no investment by thousands of people in the last few months. So that's a great audience for -- at the corporate level, that's how you tell your story, that's how you attract great talent, and it's how we continue to drive momentum. So we also are building out a marketing analytics platform, integrating things like QR codes, things we can start to build remarketing strategies off of. So it's just really we've been building the system over the last couple of years, and we're already starting to see just some incredible results. I wanted to touch to Empowered by Patrick as Hugo teed up. So I think most brands want to hesitate to call most of their subsidiaries, a division of Patrick, a Patrick company, that never felt real to us. Again, our model is so unique and powerful, and it's a winning model. And so we said really we're here to empower these brands, right? Like let's help them achieve more growth than they might be able to without our support on the back end and resources. And so what you'll start seeing now is Empowered by Patrick, this is a phrase that now our brands are saying, I want to put that on my website. I want to have that on my marketing. We're now showing up in a trade magazine multiple times, again, we have multiple brands in these categories and all those ads say a little empowered by Patrick and now the scale of our network is becoming apparent in a new way. So just to close, I wanted to hit you on the way we're starting to support our business units. Again, our business units, they are free to go to market how they want, they call on our team sometimes for strategic support and also more and more for creative support. When a customer buys a brand-new custom painted RV from the top brands now, they're going to get a touch-up kit. And on that kit, it links through a QR code to a video that we produced that shows here's all of the care and precision that went into painting this unit, and it really helps drive that attachment and that value between our brands and the OEM. Where you're going to see a video now when you buy units featuring Patrick products, but again, those customers, those dealers get to learn more about the Patrick products on it. So we're just really bringing that full circle. As I mentioned, I'm just going to close with why we're so bullish on where we're headed and grateful for where we've been and where we are as a company. The Bureau of Economic Analysis released their outdoor recreation report last week. And obviously, it's a massive industry, it's growing faster than the economy overall. And again, a lot of my work is in consumer insight. And the thing that I love is, what drives growth in our industries, it is so enduring, it's so powerful, so universal. It's the power of the outdoors, adventure, the pull to find like-minded people, the desire to personalize and customize things, and that's just driving so much opportunity for our business. So I'm actually going to leave you with a 30-second video that just kind of sums up that empowering enthusiast brand ethos. So that will play, I hope, and then Todd is going to come up and really take you through our culture. So thanks again for being here. [Presentation]

All right. So thank you, Anna. A couple of things. The cool thing if you listen -- if you think about everything you've heard so far today, the common thread that flows through everything is people. People drive performance and results and it's no secret, highly engaged people drive high performance and results. And in fact, Gallup just recently did release the survey on companies with highly engaged people and they talked about having an impact on up to 21% on profitability, up to 18% on overall sales and like a 59% decrease in turnover. And those things obviously affect the bottom line. The bottom line is that strong cultures impact engage employees, they drive engaged employees. And I learned this firsthand about 20 years ago when my journey first started with Patrick. I was brought in actually to Adorn and to kind of spearhead a cultural transformation. And in that process, I saw firsthand how the things that we were implementing, the purpose, the effective leadership principles, we're impacting the bottom line. And they did that very effectively, and we were able to -- I was able to do that for 3 years, and then Patrick bought us in 2007 and did that -- was involved in the integration process for a couple more years. And then I wrote a book called Lead . . . for God's Sake! and I thought it was going to be about cultural transformation. The book ended up being about the principles that really drive cultural transformation, purpose and effective leadership things. And that book kind of took on a life of its own and allowed me to go on a journey for the next 15 years or so, of traveling around, working with some of the most elite cultures around the country, both in business and sports. I had the opportunity to work with Dabo Swinney with Clemson football team and Tony Bennett at the Virginia Basketball, Joe Mazzulla with the Celtics. And so through those experiences, was able to see some of the most elite culture differentiators out there, and I'm excited to share some of the differentiators that we apply at Patrick. First and foremost, being my title or my role, it's not a function of HR. It doesn't flow up through HR simply because we don't believe culture is the sole responsibility of human resources. It's a responsibility of every department within the organization. And so we're very adamant about pulling that together and making sure that everybody plays a role in that. And then the Better Together thing, if you think about probably 5 years ago, any time there's a changeover in CEO, you go through a culture revisit. What do we want to stand for? Who are we? And this Better Together thing emerged early on. And it really is the personification of everything we do. If you think of our -- even from the very top, our strategic growth strategy, buying these great organizations, we don't buy depressed companies, bad companies, buy great companies with a mindset that we're going to make you better. And of course, we feel that we're going to be better as a result of that, too. And so that's a big reason we become the acquirer of choice. They know that. But we go a lot deeper. We really try to work with our leaders in defining things and the better kind of -- we compare it to Kaizen, this continuous improvement concept. And if you think about Kaizen, I think it's a great way to live your life. There's continuous improvement in everything you do. If you think about this is like a flat line, okay? I truly believe that there's no such thing -- mentally, physically, emotionally, spiritually whatever, in life, there's no such thing as a flatline as long as there's breath in your lungs. You're either trending up or you're trending down, right? And a big -- and you have to understand that gravity is always going to pull it down. So unless you're intentional about things, which is what we do with better, you won't get it to go trend upward. And so we really focus on the continuous improvement mindset. And then of course, the together part, you've heard a lot of our guys, Hugo and Kip, different guys talking about the synergy opportunities that we have. Very, very serious about that. Constant collaboration. We don't want it to just be a 1 plus 1 equals 3. We want it to be a 2 plus 2 equals 10. And so very serious. And then of course, we have a statement that kind of pulls everything together. It just reminds us that whether we're one-on-one, with a team, our customers, our business units, Better Together truly applies to everything that we are focused on. Now if you think about kind of our structure, how we're structured. This is the house of brands resting on where our end market leadership experts reside in the shaded area, kind of these pillars. And they're resting then on this -- the organizational strategic objectives, which is kind of the collaborative process of determining what we want to accomplish, okay? That then rests on the foundation of who we really are and why we do what we do. Our values, our principles and Patrick's purpose. I'm going to talk about those a little bit later, but kind of a unique thing. We do an immersive, deep dive process for everybody that resides in our home office area, that shaded area. The top area, we also deliver a message to our brand leaders and influencers out there. But the message is a little bit different. We wanted to take away 2 big things when we go out there. First of all, if we want to set the expectation that they have on us as leaders. And if you're working with Patrick leaders, here's what you can expect from us when you're working with us. And then the other thing is, is we believe in these principles so much that we truly believe that if you apply these in your own life, it's certainly going to help you as a leader in your brands and your business units, but it's going to impact your life. And it's a very important part of what we do in everything, so all of our pursuits. So the methodology, I always say leadership begins from the -- at the top, but this is an inverted pyramid for a reason because culture takes intentionality. It demands a systematic approach. You have to target something. We have a systematic approach, which is finding the heart, defining the heart, aligning with the heart and then the refining process, and you do that every step of the way. These first 2 layers that you see down here, it's so important that there's an internalization. That's not just taught, but it's truly internalized, brought into and lived out all the time. These are -- would be the equivalent of that shaded area on the previous slide that I showed you. The next area, the brand leadership, that would be the house of brands, the leaders, the influencers out there, very important. Every stage of the way, there has to be a buy-in understanding if there's a crack in the foundation, things can tip. So it's like that for a reason. And then the brand culture development is really important to us because -- I think an exciting part of this is we empower our brands then to basically take on a cultural transformation themselves. If they want to really lock in on their own identity, mission, vision, values, we have the systematic approach and process that we will then go out and help them lock in to who they want to be. So really, really cool how we've been able to impact lives through that whole process. And then everything we do goes through these 3 spheres, okay; skillset, mindset, heartset is a part of any leadership development process you're going to see. But the emphasis is always on the heartset. We truly believe that elite culture flows from elite leadership and you have to define those things from the beginning. So you think about leadership is influenced from words, attitudes of behaviors that flows from it through character. That's the heart of our leadership. Everybody plays a role in it. And then if we think about culture, culture is simply a reflection of the collective character within. And again, you get this character thing that keeps emerging. You have to focus on the heart of things, that's where the victories lie, that's where the problems lie. If you think about teammates you've been with in the past, whether it's in a boardroom or on a team, you get eye rolls, back stabbers, people hoarding information, people that you can't trust. Those aren't skill set or mindset issues. Those are heartset issues. Enron was a perfect example of that. It wasn't skillset, wasn't mindset. It was heartset. And so these are very, very important to us as we go about what we do. This this is the heart. This is truly what we're talking about when we take our leaders through an immersive process. You have the values over here, the acronym that we work on. You'll notice in the effective leadership principles, a key to us is these are action items. We want you to bring these things to life. It's not just a word that we're teaching. We're really helping them apply it to everything that they're doing in their business units, how are they -- what does it mean to lead with humility. And then we take that -- we take that a step further or we cascade it to continue throughout the organization in a couple of ways. One is we have these team accountability leadership coaching groups where we really coach our managers and leaders. We set them up on a regular cadence with their leadership team, set them up with peer-to-peer accountability, teach them how to build trust through vulnerability, focus on self-awareness. And so then that could cascade throughout the organization. And the other thing is the 360 process that just really is built specifically around these things, both for accountability and development. And then the last thing, you saw this at the beginning, we are enthusiasts. It's a big part of everything we do. We love what we do. Because if you think about all the components we build that go on an RV; a boat, an ATV or a house. And those things all have in common that they pull people together for great times, relationships, joy, all those things are a very meaningful part of everything that we strive to do. And so this purpose that we've created fits perfectly when you think about we're enthusiasts passionately focused on positively impacting lives, not only the hearts and lives of our team members, but all of the markets we serve are -- that's what we're striving for. And so for us, you guys results definitely matter. It's very, very important to us, performance and results, but part of that performance and results is the impact that we get to have on not only our people but on all of our customers and communities that we serve. That's what Better Together is really all about. And so with that, I'm going to bring somebody up here to talk a little bit more about results. Andy?

Thanks, Todd. Good afternoon, everyone. My name is Andy Roeder, and it's a pleasure to speak with you this afternoon as CFO. It's been my privilege over the past year-or-so now to see firsthand, here we go, the strength of the team here at Patrick, the resilience of our model and the earnings power that we have going forward. And I'm just excited to be a part of it. A little bit about myself. I'm born and raised in Elkhart County, RV Capital of the World. Also, I might add that the pontoon capital of the world. After degrees at IU and Notre Dame, I got my start in public accounting. I spent the last 10 years on the OEM side in the marine industry. So I know a little bit about how our customers think. I'm an outdoor enthusiast myself. You can often find me on my boat in the summer or by a campfire or I really enjoy being on my side-by-side trolling around our farms. So anyway, over the next 10 to 15 minutes, I look forward to giving you a sense of the strength of our financial model here at Patrick specifically, the diversification strategy and the resilience, it's brought our model. Our margins, just a testament to the organic and strategic execution of the team. Strong cash flows. The team does a great job of managing our working capital. Our capital allocation discipline but opportunistic and finally, the opportunities we have ahead in our 2025 outlook and beyond. Jump right into diversification. In 2010, we were a $300 million company. We've grown that to nearly $4 billion. And we've -- we were a housing and RV supplier back in 2010. Now we're an outdoor enthusiast in housing component solutions provider. Looking over time, we've outperformed our end markets every step of the way. We entered marine in 2016 and grew that segment of our business to nearly $1 billion. As Rick talked about, earlier this year, we jumped in, more meaningfully entered the powersports space, and look forward to doing in powersports what we've done in RV and marine. Looking at our financial sales margins, earnings. You see the COVID spike there in '21 and '22. What I want to focus you on is that afterwards, we are a bigger more profitable, more resilient company. We gained a ton of market share during the pandemic when our customers need us the most. We've acquired many margin-accretive companies during that time frame. Our gross margin, 18%, 5 years ago, nearly 23% now. And that higher margin profile has driven higher operating and EBITDA margins. Our operating margin was 10% a couple of years ago. We look forward to getting back there when our markets return to mid-cycle and beyond longer term, as I'll show you later in my presentation. But most recently, our margins have been resilient, really a testament to our good, better, best product offering. EBITDA margin -- adjusted EBITDA margin, 12.7%, has remained strong here in the last couple of years, despite our end markets being down 30% to 40%. As you can see in this next slide, that white line represents RV shipments. Our team does a really nice job of scaling and flexing our business, managing working capital. And you can see despite the RV shipment pullback, our cash flows have remained strong. We expect to generate over $290 million of free cash flow this year. I'd point you to looking at '22 to '23, our revenue dropped from $4.9 billion to $3.5 billion, yet we increased our free cash flow, again, just a testament to our team's ability and execution of managing working capital. Our balance sheet is an important tenet of our strategy here, Patrick. It allows us to do what we do to execute our strategic playbook. Earlier this quarter, as Andy mentioned, we executed a credit refinance transaction. We issued a $500 million bond at 6.38%, redeemed a $300 million bond at 7.5%. So we reduced our interest expense. We upsized the revolver, so we increased liquidity by nearly $300 million. We pushed out our debt wall, as you can see here in the bar chart. And we improved terms to an already strong credit agreement. So I feel really good about that transaction and our ability to stay on offense. How do we spend our capital? As you know, as Andy talked about, the majority of our capital will go to acquisitions. It's been our growth engine and will continue to be so. We're going to continue to invest in our business. We expect to spend $70 million to $80 million in CapEx this year. About 1/3 of that is maintenance CapEx. The remainder, the majority is strategic CapEx. You saw in the videos that Hugo showed, a few examples of that. But we're going to continue to invest in automation. We believe not only does it increase capacity, but it improves product quality and consistency as well as driving operating efficiencies. Dividends. We're going to stick to our dividend policy. We'll pay out $50 million in dividends this year. We just increased our dividend 9% to $0.60 a share per quarter. Share buybacks will be opportunistic. It's accounted for 8% of our allocated capital since 2019. Right now, we have over $700 million of liquidity. So we're well positioned to strike when an opportunity arises. Our guideposts for target leverage are 2.25x to 2.5x. As Andy mentioned, we will go above that opportunistically. We did that with Sportech in January. We were 2.9x after that transaction, but expect us to get back down within target range 2 to 3 quarters. And at the end of Q3, we are at 2.6x, and that's after the acquisition of RecPro in September. So we're well on our way and feel good about where we sit. So talked about where we've been, and we're at. And now here is where we're going. We expect 2025 retail for RV and marine to be similar to 2024. Given the destocking and the discipline that our customers and dealers like have showed in the channel -- dealer inventory channel that's healthy right now, we expect growth in wholesale shipments from flat retail, we expect RV and marine to be both up 5% to 10%. We believe the demand for affordable housing has plenty of runway. We expect another strong year out of manufactured housing. Our outlook is up 5% to 10% next year. We expect housing starts to be up -- to be flat to up 5% next year. And then Kip talked about our Powersport shipments. We're expecting shipments to be down 10% next year, but we do expect to continue to gain attachment rate and/or organic content to be up mid-single digits. Longer term, here is what we can show you in terms of op margin relative to our sales, we expect to continue to expand our op margin as we invest in accretive projects, both from a CapEx standpoint and from a strategic standpoint, we're going to continue to utilize our scale to drive synergies, both cost synergies and growth synergies and all driven by the team that you've seen today that knows how to control costs and navigate our end markets that can be volatile. So we believe the future is bright at Patrick, and I'm certainly happy to be a part of it. I want to give you a little more color on the RV and marine channels, specifically in the near term. Our markets are bouncing along the bottom right now, we believe. RV shipments this year will be 320,000 to 330,000 units. That's compared to what we believe will be mid-cycle average of 400,000 to 450,000 units. Marine shipments this year will be about 140,000. That's compared to, again, what we believe will be mid-cycle average of 200,000 to 225,000 units. And then MH shipments will be 104,000 this year, and that's compared to 125,000 to 135,000 units, what we believe will be the next mid-cycle average. Dealer inventory in RV and marine is healthy. Andy showed you that earlier this morning. The lines represent weeks on hand. You can see they're well below historical averages as represented by the shaded parts here. Again, we don't believe that dealer inventory will get back to those historical averages. However, we do believe that we will see a restock when retail influx, we believe dealer inventory right now is too low. Total addressable market, the end market presidents gave you a sense of that. Here it is in summary form. RV nearly $5,000 a unit. We believe we have 2x to 3x runway in RV. Marine, we believe we have about 4x, in MH, 2x. And as you know, in Powersports, we're just getting started. So plenty of TAM out there to capture. Before I turn it back to Andy, I just wanted to show you this slide, just to remind you of the focus that we have on shareholder value and what we've achieved. We've talked about our playbook. Our playbook has worked. We've nearly doubled our market cap in the last 5 years. We've significantly outperformed the Russell 2000. We're proud of that. We're going to continue to execute the playbook and look forward to increased shareholder value down the road. So that's all I have today. I appreciate your time, and I'll turn it back over to Andy.

Thank you so much for taking the time to listen to the team today. I hope that you had some good takeaways from this session. Hopefully, you saw kind of that we've got a vision. We feel like our markets are at a great place for an inflection point. We've got an incredible team. We've got an executable plan that has both strategy and organic composition to it. And we're poised to flex and scale this business model to support our customers and the next evolution when the cycle does turn. And so we're very excited. And hopefully, that came through in everybody's presentation. Obviously, again, we're super excited about where the markets sit today because of what we think could be the next run and the leverage ability that we have as an organization. And we're going to stay focused and disciplined on that. And it's -- for us, it's really keeping a simple, simple mindset that stays focused and then cascading the vision throughout our organization and aligning our team. And hopefully, the strength of the team came out as well, the importance on culture for us. We don't talk about it a lot, but it is very important from an alignment perspective. And hopefully, you see the passion that this team has to be able to execute and deliver results in alignment with not only a financial strategy. But because we want to take care of each other, we want to continue to drive the business, in alignment with our purpose. So again, I hope you took away some takeaways. We are happy to answer questions at this point in time for anybody that has anything that we've talked about throughout this presentation. So I'll invite the team to come up here for any questions that you may have.

It's Craig from Baird, again. I had a question for Andrea. Patrick has crushed it on the M&A side, primarily in RV for a long time. Are there differences in Powersports or Marine that make that more difficult given the home field advantage you've always had in Elkhart on the RV side?

No. I think the process is fairly simple and we look to replicate what we were able to accomplish in RV in Marine and Powersports. I think the geographic dispersed markets, we're able to navigate those appropriately and go after who are targeting. And I will tell you, we do maintain a very detailed pipeline, as Andy mentioned, as we know our competitors in each product category. And so we know who we would like to talk to you and kind of look after and then as we also mentioned, as we get our deals, a lot of our pipeline comes from just relationships that we have within those industries and actually brands and sellers have already been acquired that are now on the Patrick team.

Yes. We get a lot of referrals from brands that we've already acquired. And a lot of these individuals talk to each other. So even the competition in this space is very collegial. So they want to know what it's like to be acquired by Patrick. And so that's our best source of referrals. When you talk about home field advantage, certainly in Elkhart, because everything is so close, it's easy. But I'd also tell you that that's not necessarily a competitive advantage in proximity to the customer, whereas in the Marine space today, especially with our geographic footprint that we have I feel like we've got a home field advantage in Marine because we know all these regional areas. We're already serving all these customers. And so from a pure strategic perspective, the opportunity to acquire in the space is there. But as well, more importantly, I think, the organic opportunity in Marine because we can set up small hubs where our lifestyle business competitors who are more family-run business, if you want to think about how a lifestyle business is we categorize it is. They can't necessarily set up a hub or we can put 3 or 4 product brands into a regional area very quickly. We're happy to lease space, set up a facility and bring our brands together to be able to bring a solution to a customer and capitalize on that competitive advantage of proximity to customers. So I feel like we've got a home field advantage in Marine, and the goal would be to replicate that in the Powersports space as well.

Alex Perry from Bank of America, again. Just on the target of the 12% to 16% operating margin on $8 billion of sales, is there a target in terms of timing on that? And then maybe just walk us through sort of the key drivers to operating margin expansion to get within that range?

Sure. I mean I can give a couple of points, and then I'll let you jump in, Andy, but I think a lot of it depends on our end markets in terms of timing. So I think we intentionally didn't put a timeframe on there. We do believe that they're right for an inflection. So hopefully sooner than later. But I think you heard today the driver. I mean, certainly, operating leverage we will -- we don't have to add back a ton of fixed cost. So I'd start with that. And then I'd look for -- think about accretive projects, both strategically and organically.

Right. So we wanted to give you a range of Op margin at various revenues. And so we're pretty intentional about not telling you what that number is over that 5-year period. But I can tell you how I calculate the model and how we kind of think about calculating the model. But I want to leave the assumptions to you on the industry, okay? But it's really simple to me. It's content per unit, okay, times your industry shipments, whatever you want to estimate those to be over the next 5 years, pick up 5% annual growth rate or something like that. You guys do the math on, okay? And then on top of that, you're going to look at our profile. We're going to continue to deliver accretive gross margins, right? Pick what you think that's going to be, but that's going to generate an operating margin leverage, okay? It's going to generate operating income, operating cash that we're going to reinvest in the business. We talked about kind of a $400 million to $500 million operating cash target range that we're going to redeploy into the business from an M&A perspective. You add all that together, and that should drive within that margin range again. And I'll tell you, we've used assumptions, but I'll leave that up to you on where you want the industry, you want to model your industry assumptions out, but we've done that to be able to give you kind of that grid. And -- so there's more -- there's math behind that. Just so you know that's not us throwing darts at a board and putting some up there so you can see an up into the right trajectory. We put math to it. And that's why it's an executable strategy from our perspective. And why we get excited about it is because it's deliverable, it's actionable. We know what we have to do, right? It's just a matter of execution. We do need some margin -- we do need some market help. And you might see just inside that 5-year time period, market shifts up and down, right? But if you pick a reasonable estimate as it relates to what your market shipments are, right, generally, that will offset over that 5-year period. And that's how we think about it and it's fairly simple. And we do this every 5 years and not just every 5 years, we're doing it all the time. But on a 5-year basis, we've been successful at executing upon our strategic vision. So that's what we're hoping to continue to do.

Scott from ROTH MKM, again. Can you talk about tariffs? I know it's early, but the questions are starting to come up all over the place. Maybe just talk about how the supply chain is different now versus, I guess, 2017-'18 and how you guys are positioned, depending on which angle Trump goes after?

Sure. I'm going to let Hugo answer that question. He's been very, very proactive in looking at this and making sure that we're mitigating as much risk as possible.

Yes. We have been very intentional about derisking the business. Just to give you an example, in 2019, we used to procure a lot more millions of dollars from some of those areas where tariffs could be a lot larger per day everyday change in conversation. But -- so we have been very strategic about derisking, and we are probably about 1/3 of what we used to procure from those countries that we will consider could have higher tariffs. And we're still derisking the business, even some of the business that we have from a few of those concentrated areas in Asia. We are calling it today low risk because we already have alternatives that are going to offset any of those tariffs for the most part, not completely, but for the most part. So complete plan, started a few years ago, and we have been executing it.

And we will pass pricing along. So I think a lot of you know kind of from a pricing strategy perspective, we're very fluid in our pricing. We don't have contracts with our customers. And in the RV space, in particular, we changed pricing on 30-day notice up or down within a relevant range as it relates to the commodities. And so we expect to pass that through, if we do see some tariff impact. Where that could impact the markets is on the ASP side of the business. But at the end of the day, again, we're going to do our best to mitigate that as much as possible to keep our OEM partners competitive.

Noah Zatzkin, KeyBanc. Just maybe one on the kind of aftermarket opportunity, given the acquisition of RecPro, when you're looking at targets, are you going to continue to focus on OEM focused businesses and plugging them into RecPro? Or would you look at aftermarket focused businesses in addition to kind of leveraging RecPro in terms of going after aftermarket? Like how is your kind of consolidated aftermarket approach going forward?

Sure. I think right now, we're focused on the organic impact of RecPro versus acquiring more aftermarket businesses. That doesn't mean we won't acquire other aftermarket businesses. We've been looking for quite some time for the right platform for an aftermarket direct-to-consumer model and RecPro fit that space for us. And so like I said earlier, the opportunities that we see today across our product spectrum are significant. And so we've got plenty to do from my perspective to keep focused on that and really leverage the scalability of platform that we see today. So I would say, from an M&A perspective, probably more OEM solutions-oriented products. But that doesn't mean we're not going to go look for an aftermarket, I feel like we've got the platform that we need that we have the leverage ability to execute off of this on an organic basis and really put our focus and attention to that. And so that's why we're so excited about RecPro but probably more OEM focused than aftermarket. I wouldn't preclude us from doing an aftermarket deal though either.

Joe Altobello, Raymond James. On M&A, a couple of questions. I guess, first, who do you typically -- and I'm sure this differs by end market, but who do you guys typically compete against for that acquisition? And is it usually a founder-led business who may be looking for an exit, for example or is it more of a corporate type?

From a competition perspective, I would tell you that we've been fairly advantaged over the last several years and that we've been in a position to be on offense where a lot of other people have been on defense or either out of the market. In the RV space, there's really nobody that we compete with. I'd tell you on RV deals in Marine, there's a few players. There's a little bit more private equity because the margin profile is a little bit higher on the Marine side of the business, and there are some larger revenue players out there. But private equity has been out of the game for a couple of years now. I do think that could shift when we do see a market inflection and we do start to see kind of the next run. And that's why I want to stay on offense right now and make sure that we stay competitive, have the liquidity to be able to execute on M&A. I'm not saying that we're not going to -- we're going to have competition in those spaces. But so far, we've been kind of the acquirer of choice with, I'm going to say, limited competition on -- and one of the reason I say that is because we organically cultivate 70% to 80% of the deals ourselves. We don't rely on investment bankers to bring deals to us or run a process. We participate in processes, okay, when we get a compelling deal. But we're out there all the time knocking on doors, making sure that we're the first one in line when it comes to an entrepreneurial principle that wants to sell. And like I also mentioned, they're looking to get out that's a warning sign for us that something is going to change with that business. So it's more about us being proactive, talking to the deal pipeline, planting seeds, saying "Hey, you know what, when you're ready to kind of derisk a little bit, like I said, monetize your investment, stay on and run the business, we want to be first in line," and we're buying successful businesses. These guys don't have to sell to us, okay? We've got to sell them on the Patrick value proposition. So that's a big part of the story that we try to leverage when we go in and talk to these customers is, "Hey, this is why this is such a great landing zone for you to come and live after you decide you want to derisk a little bit."

And just to follow up on how long is the cultivation process, typically?

It depends. I mean it could be as short as 60 days. Otherwise, depending on where these players are at -- and we kind of -- we're always touching people, so we get a read on what their appetite is, what they're thinking about, kind of -- and you can tell when you're talking to them, whether there's enthusiasm towards, "Hey, you know what, I might be interested in doing something sooner or I'm not ready right now, but I'm going to keep you in mind." So we get a feel on that. Typically, I'd say it's 6 to 12 months to plant a seed on a business that isn't actively thinking about selling the company.

Yes. I'll just add a quick point there. Certainly [ we have closed ] something similar, a little bit different to [indiscernible] as well, particularly in the last couple of years. And the reputation we've had with [indiscernible] a number of times that we enter in deals with the intent to get the deal done. So we're not going to gain that we got to be efficient in process. And so that has been a differentiator for us, and it's been certainly a value element that we've heard from be it private sellers or even private equity. It's something that's put us here in the front of the line.

Just another question about margins. In the illustrative example, going from $3 billion to $8 billion, you had margins as a percentage, doubling. I guess, can you give us a feel for how much of that is actually volume driven versus business mix, whether that's aftermarket, whether that's marine, Powersports, and then also, what would the implications be on gross margin? What will we be thinking mid-20s, high 20s? Just get a general sense there?

So it's going to be volume, primarily. So we're not looking to -- it's going to be a combination of that entire strategy, right, of 2% to 3% organic growth and redeploying capital in from an M&A perspective with accretive margin successful businesses. I'm going to tell you, we look at an inc in small increments, right? We're looking at saying, okay, we want base hits. We're not looking for home runs to drive that type of operating margin level. But from a volume perspective, we look to continue to deliver slow and steady, let's just call it, accretive margins. And gross margin, mid-20s is kind of a target range with better leveragability on the Op margin side because we just don't have to add a lot of overhead to support significant increases in volumes.

Dan Moore of CJS. Maybe one for Andy and Andy and one for Andy and Anna, if I could. Just going back to the 2025 outlook on Slide 101. What are your expectations for Patrick's content growth either by vertical or kind of overall in addition to the growth outlook that you gave for each of the verticals on a market basis? And then beyond '25, do we think about going back to kind of the 30 to 50 basis point annual Op margin expansion? Is that the right way to think about it? And then one follow-up.

Correct. So I think in the content, we're looking at 2% to 3% organic content on an annual basis is kind of how we've built our content model. And yes, I'd say 30 to 50 basis points or more once we kind of hit the inflection point, depending on kind of what that scale is, so again, pick a number, but if it's -- let's just say it's 5% industry growth, right, and you add all this together, that's probably the 30 to 50 basis points of op margin. If it's more than that, I think we can leverage a lot better because we just don't have to have that overhead.

Great. And then it's going to sound like a backhanded complement, but it's really a complement. You've had this incredible success, obviously, over the last decade plus without really a cohesive brand strategy and -- so my question going forward is what does kind of marketing spend growth look like? And how do you think about allocating additional marketing dollars across those brands that you want to spotlight and how will you think about measuring the return?

So I do think that there's a ton of opportunity in helping our individual brands become more present. And as Anna talked about, it's really about empowering the brands, right? And so we want empowered by Patrick. We still want the brand in the front windshield. We want them wearing the brand Jersey, right? But it's about empowering them, showing them what other brands are doing especially to be able to generate incremental growth. And we're going to look at what that looks like. So I'll give you a simple example. Rockford Fosgate for us is probably one of the best marketing brands that we have out there. They are aggressive, they're forward thinking, they're forward looking to have -- they have the most material marketing spend of any of our brands out there. But as Anna mentioned as well, you've got guys tattooing Rockford Fosgate on themselves. I mean that's how powerful their brand is, but they are present, they are out in the marketplace. And they are purpose-built audio. Well, we've got a brand called Wet Sounds, which is an equivalent premier audio solution model that isn't well known and has the opportunity to replicate a brand strategy like Rockford has to gain additional penetration and opportunity. A lot of our customers don't want to look at a product that they haven't heard about or don't know about. And so making sure we've got that presence is something that we're focused on as it relates to this. We're not going to become a marketing agency ride or a retail branded model, but there is a ton of leveragability to unlock in our individual brands to make their presence more well known. And we're going to do it thoughtfully. We run a lean organization, and we all roll up our sleeves and dig in where we need to. So a lot of the things that you're seeing, Anna is doing herself. And so that's just how we think about it, but it's going to be a thoughtful return-oriented model that's related to the brand marketing strategy. Tristan?

Tristan from BMO, again. Just curious, post the election, has there been any sentiment shift among your customers or maybe dealers?

I don't know that we've felt anything. I think if you just look geographically where our markets are at, there's probably more enthusiasm based on the election. I'm not commenting one way on other on what I think. But at the end of the day, I would tell you that I think there was optimism either way. I think people just wanted to get the election over with. And as consumer confidence builds, again, that's where we see the opportunity in our markets. That's really what drives a lot of our markets at the end of the day when it comes the outdoor enthusiast space. So hopefully, that will translate post-election with the uncertainty that was there, and we'll see where it goes.

Okay. And just one more question. At some point, there's going to be an RV content up-cycle. How do we think that plays out slow and steady, we wake up one year and we just see a big content jump?

History has shown that it's not slow and steady. And we're at -- we've seen the pendulum swing between low-end, less contented units to high-end, higher contented units. And I didn't think the mix of units could get any worse is what I'd tell you, probably midyear in 2024, and it actually did. Our content numbers held up despite the fact that there continue to be a mix shift to smaller units and single actual units. And so that's why we have some confidence in kind of where we're at today, the organic growth potential that's out there, the business that we think we can achieve. But the expectation is that, that pendulum is going to swing back as consumers become more confident. Once you buy any unit, whether it's RVs, boats, you name it, the general model is I want 3 more feet on my next unit, right? And so we expect people that have bought these low-end units to upgrade. So 70% of existing RV owners typically upgrade within 3 to 5 years, they're generally going to move to a larger scale unit with more content in them. So I'm not -- slow and steady is how we build a model, I guess, but that's not what history has shown.

Richard Zimmerman, TD Bank. Thanks for the presentation. It's sometimes easy when things are going well and you're growing revenues just to say status quo, but we went through the most difficult time probably in anyone's history here with COVID, and you had a tremendous amount of growth, obviously, because of that. Can you talk about like some of the things that you learned as a result of that post that with obviously a decline in some of the businesses, what made you -- what made your company a better company today because of what you've been through in your experience?

Certainly, a couple of things. First of all, the scalability advantage that we have over, again, I'm going to call it lifestyle business competitors, these $20 million and $30 million companies versus our, let's just call it, $200 million product portfolio in that particular market. Our ability to scale with our customers is a competitive advantage. We have the ability to invest in inventory to be able to support them, invest in teams, bring additional innovation looks that our competitors can't. And when our customers could not get product, we were able to not only be able to source better than our competitors were, but because we operate under these different brands, so I use fiberglass as a simple example. We've got 5 different fiberglass companies today, all running with different capacities right, and throughput? Well, we can flex that behind the scenes and be able to deliver our customers. If one of our businesses is running at -- just use 100% capacity, doesn't have any more room and one of them is running at 50%, we can shift capacity, even -- this is what -- this is the advantage I was talking about without consolidating facilities and getting rid of the brand DNA, we can move that capacity around to be able to take care of our customers. And our customers remained loyal to us. In my mind, for one of the first times that I've seen in many cycles, post cycle when we had inventory coming in, we were talking them in advance of the slowdown saying, guys, the music is going to stop here at some point in time. We're bringing all this inventory to make sure you're good on the way up. Don't leave us on the other side, right? Don't -- all of a sudden, someone comes through with a competitive quote on the back end, take that competitive quote and take away the business and leave us hanging with inventory. Well, that, for the first time, we saw a lot more loyalty from our customer base after -- kind of after it kind of cycled down or after kind of the pullback where our customers stuck with us, we were able to leverage our inventories, we were able to dollar average down in price. And our team has done a fabulous job of pricing. I think it's part of the margin story. But our team is as good as it gets from my perspective in being able to go to market, deliver thoughtful pricing to our customers. And it's really because of being proactive, number one, but it's also trust and it's being proactive on the downside when pricing comes down as much as it is in transparency. And so they -- our customers know that we're going to let those prices flow through up or down, and we're going to be as proactive given back prices as we are giving price increases to our customers. And so those are 2 things I can think of, but the scalability of the business without question, is a competitive advantage from my perspective that we don't want to lose.

David Landry from [indiscernible]. I was wondering if you guys could clarify how you manage incentives at the business unit level? And related to that, how you adjudicate between them when you're shifting capacity between different business units, they're collaborating or sharing costs and those types of situations?

Sure. So One of the things in our M&A model is, again, we're a plug-and-play acquirer, if it's not broken out, don't fix it, whatever comp structure was in place at the time prior to acquisition, that's generally the same comp structure that's in place post closing. So we want them incentivized to be able to grow the business. In fact, we'll add a little bit of a kicker as it relates to incentive to deliver above and beyond expectations. So we'll work with -- we work with varying comp structures. In general, what I'd tell you is, as an organization as we think about it, our mindset is 25th percentile as it relates to base and 75th percentile as it relates to incentive compensation. So we want our teams highly incentivized based on the operating profitability of the business. And as it relates to moving business amongst our brands. We promote kind of a spirit of goodwill, right? You might have to give up a little bit today, but you will get that back in return. And so because of the culture that we've been very active in as it relates to kind of Better Together -- I would tell you there's an understanding of being patient, hey, I might have to give up a little bit right now, but I will get that back in the future because we remember those things. And so by refereeing that, if you will, or kind of coaching that model and quarterbacking that, we're able to allow our brands to collaborate and give up a little now for something in return. And we always -- we remember those things, though, too. That's part of the model, and that's part of the way we think about it. So we don't forget about that. But we're not just pure profitability based either, right? It's about hey, we're working towards the good of the organization and the team and how can we help you be better and all that kind of plays into that model.

Griffin Bryan, D.A. Davidson. So we've been in the down cycle here for a while for both RVs and Marine bump along the bottom, as you said. I guess what would it take for you to be to get like excited? Is it like 2, 3 months like positive retail data or does it take a little bit more than that? And I guess, just overall expectations for show season coming up?

I would say, yes, retail inflection. So we'd like to see some positive retail momentum because we do believe that there's going to be a restock that's going to be needed based on increasing retail that's really what we're looking for today, signals consumer confidence, right, it's something that we have absolutely look at. I think we will start to feel that. We'll start to feel kind of some bubbling up. And that's what we would look for. I'm excited about where we sit today. And I will tell you that just from an operating perspective, I think one of the things that we talked about in our last call and especially as it relates to kind of Q4 is feel like we're approaching inflection point at some point here in the next couple of quarters or several quarters. We're going to have a little bit of inefficiency right now in Q3 because that scalability factor that I think is a competitive advantage. We don't want to lose that. And we can certainly -- we can take more costs out, just so you know. So this business is very scalable, and we'll size the business according to the revenue stream. While it's inflecting here a little bit, while people are being very cautious about adding inventory in Q4, we stayed and said, look, the team is ready for the inflection, let's not lose that competitive advantage. So I feel good about where we sit today as it relates to the scalability and the flexibility. But to your point, I think we're looking for some retail inflections.

And just to add to that, when you talk about the show season coming up, as I talk to a lot of our customers, executives at our customer level, they're excited about the product they're putting out there right now. They've made a lot of changes, they've put innovation into their product, and they're really doing some unique things not to get granular with what they're doing. But in our conversations, I'm pretty excited about how aggressive they're getting to get people onto the lots, get people into units and really kind of start that momentum again. So I'd like to think that as we get into the Tampa show, which is going to be the first one in January, we'll see that momentum start to build.

That wraps it up today. I appreciate everyone's time. We do have box lunches for you to take. And then if anybody can get a vest, let us know, we'll give you 1 of those. And feel free to follow up with us after the fact that we can jump on a call or something.

Yes, thanks so much for taking the time out of your day to spend a couple of hours. Our team is here to [indiscernible]. Thank you.