Good morning, ladies and gentlemen, and welcome to Patrick Industries' Third Quarter 2023 Earnings Conference Call. My name is Rob and I'll be your operator for today's call. At this time, all participants are in listen-only mode. The question-and-answer session will follow the formal presentation. Please note this conference is being recorded. And I will now turn the call over to Mr. Steve O'Hara, Vice President of Investor Relations. Mr. O'Hara, you may begin.

Good morning, everyone, and welcome to our call this morning. I'm joined on the call today by Andy Nemeth, CEO, Jeff Rodino, President; and Matt Filer, Interim CFO. Certain statements made in today's conference call regarding Patrick Industries and its operations may be considered forward-looking statements under the securities laws. There are a number of factors, many of which are beyond the company's control, which could cause the actual results and events to differ materially from those described in the forward-looking statements. These factors are identified in our press releases, our Form 10-K for the year ended 2022 and in our other filings with the Securities and Exchange Commission. We undertake no obligation to update these statements to reflect circumstances or events that occur after the date the forward-looking statements are made. I would now like to turn the call over to Andy Nemeth.

Thank you, Steve. Good morning, everyone, and thank you for joining us on the call today. Before discussing the results for the third quarter and first nine months of 2023, I want to take a moment and continue to thank our amazing team members for their dedication and commitment in driving solid organizational performance during incredibly dynamic market conditions. Our success would not be possible without their hard work, attention to detail, and commitment to excellence and quality customer service. Our team continues to be driven by a purpose and passion for the great outdoors and the impact our branded quality, innovative products, and services can have as we strive to elevate the customer experience for our valued partners in the outdoor enthusiasts and housing markets. Over the past few years, our strength, resilience, and results have reflected the benefits of our strategic diversification, and this quarter was no exception. In spite of the fluid dynamics of our end market landscape in the face of the challenging macroeconomic environment, specifically related to the highest interest rates in more than 20 years, our team and flexible business model continue to adapt and perform. Our balance sheet remains well capitalized with plenty of liquidity, and our cash flow evidences the underlying strength of our portfolio of branded companies that drive our organizational model. In addition to the benefits of our diversification and strategic model, our three end market-focused businesses have unique advantages that complement each other in our portfolio. Our RV focused business units generally have a highly leverageable variable cost structure that is also highly scalable up and down in alignment with real-time changes to production levels. Our marine focused business units generally have a higher fixed cost structure that delivers a higher engineered core competency value proposition. And our housing focused businesses generally offer us a more stable, low overhead platform with a low fixed cost structure that is highly leverageable, especially if production volumes improve. Many of our businesses cross-pollinate in manufacturing competencies, continuous improvement opportunities, product lines, capacities, and markets, allowing us to constantly synergize and continue to bring new innovations to our customers. The current general theme across our end markets from our perspective can be broadly centered around the overhang of high interest rates and their impact on retail consumer sales conversion, dealer inventory stocking, and the overall increased hurdle rates for return on capital. Over the last 15 months, OEMs in the RV industry have skillfully managed their production downward, showcasing the industry's real-time scalability, adaptability, and maturity. As we head into the fourth quarter, we see the industry currently matched in a period where retail registrations and wholesale production are closely aligned and positioned for a one-to-one basis and are very nimble and ready to pivot. Our teams have done an exceptional job of flexing our cost model in alignment and executing on numerous automation initiatives to improve our productivity, throughput, and efficiency. We will continue to support our OEM partners' diligence and remain prepared to respond swiftly when we need to ramp up production or scale back further if needed. On the marine front, as we noted last quarter, marine OEMs have responded in real-time to inventory restock calibration in the field in partnership with what we believe is similar to the RV industry, a cautious dealer base that appears extremely sensitive to inventory imbalance in the channel and the high carrying cost of floor plan financing. Retail on the marine side has held up better than we expected, with OEMs and dealers alike intent on keeping dealer inventories and their floor plan costs as low as possible in this environment and extremely manageable.

On the housing front, our housing markets, both manufactured and single-family multifamily, have also been very disciplined in their production and build schedules in markets where we believe there is and expect will continue to be a shortage of overall housing inventory. Beginning in mid-fiscal 2022 and carrying through fiscal 2023, we have worked to identify and eliminate costs without compromising the quality and reliability of our operations. On an annualized basis in 2023, we eliminated an estimated $100 million in total costs, enhancing our ability to maintain margins as we respond to market conditions and industry trends. Our margins have remained resilient amid slowing marine production and what we now expect to be the lowest RV production in 10 years. Our team's disciplined execution on labor and cost management, in addition to our investments in automation and continuous improvement, helped drive gross margin improvement of 170 basis points, while our operating margin declined just 10 basis points despite the 22% reduction in net sales. Additionally, our adjusted EBITDA margin increased 130 basis points from the third quarter of 2022. From a working capital perspective as well, we have continued our disciplined inventory management strategy that enabled us to reduce inventory by $37 million in the third quarter of 2023 and $150 million year-to-date and more than $215 million in the last 12 months.

These measures have not only bolstered our financial stability but have also paved the way for us to seize opportunities and maximize the profitability of our business when production increases in the future. The core of our business is built around a brand front-end foundation anchored in the entrepreneurial spirit focused on our innovative full component solutions model. We strategically and organically built a product offering that strives to deliver a good, better, best value proposition, with our strategic diversification representing a further extension to bring the best solutions to our customers. We offer customers a full line of products, both up and down scale in order to meet their needs along a continuum of feature and price. Our goal is for our customers to be confident that we have what they need to design, engineer, and build their RVs, boats, and houses no matter what category of product line they are producing. With RV OEMs looking to reduce their ASPs in this environment, the importance of our good, better, best model is clear and evident and remains the cornerstone of our brand forward go-to-market strategy. With this model, we expect to continue to gain market share, which will continue to pay dividends when production levels increase. The strength and resilience of our operating model, liquidity, and competitive leverage position has enabled us to be proactive and strategic in a cautious environment and further invest in our foundational model to continue to future-proof our business and drive off of our already solid foundation. As mentioned, our brands and the strength of their teams are the foundation of our company, driving our innovation and the engineering of new products every year, bringing new ideas and solutions to our OEM partners. As we continue to be forward-thinking, we plan to further enhance and embed our strategic value proposition. One example, as we head into the last quarter and upcoming model year, is our deep focus on collaboration across business units to create a seamless process to improve product solution innovation through the creation of Patrick's Advanced Products Evolution group. This independent focused engineering team will work closely with our already established innovation team, and together will help our brands collaborate, shorten product development times, and elevate our commitment to excellence as we look ahead to the exciting rollout of model year 2025 units and beyond in our markets. Before we highlight our third quarter year-over-year financial performance, let's revisit the 2019 comparison we've made in the past two quarters that we believe demonstrates the improved resiliency and profitability of Patrick. In the third quarter of 2023, RV wholesale unit shipments were 21% lower than the same period in 2019. Despite the sharply lower unit volumes, total revenue in the third quarter of 2023 was 53% higher than 2019. Gross margin was 460 basis points higher, and operating margin was 160 basis points higher, helping drive a 97% increase in EPS versus the same period in 2019. In addition, this quarter, we generated $105 million of free cash flow versus $24 million in 2019. Compared to our results last year, our third quarter revenues decreased 22% to $866 million. And on a trailing 12-month basis, our consolidated revenues were approximately $3.6 billion. Our net income in the third quarter decreased 33% to approximately $40 million, and net income per diluted share was $1.81. As a reminder, we are comparing to a prior year period where we hit third quarter records related to revenue and net income. Our team delivered another impressive cash flow performance this quarter with operating cash flow of $115 million, implying free cash flow in the quarter of $105 million. We ended the third quarter with total net liquidity of approximately $700 million, which along with our free cash flow reflects our prudent financial management and heightened ability to execute on growth opportunities while maintaining the flexibility to continue to pivot and whether current and future macroeconomic challenges and opportunities.

Thanks, Andy, and good morning, everyone. On third quarter RV revenues, which represent 46% of our consolidated total, decreased 24% to $400 million when compared to the same period in 2022. Our RV content per unit decreased 2% on a TTM basis to $4,957 per unit, driven by our actions to pass along favorable pricing to our customers, reflecting certain declining commodity costs and smaller units taking larger percentage of production mix, partially offset by market share gains. Additionally, from our operating perspective, OEMs returned to a more predictive production schedule in the third quarter, which allowed us to better allocate our resources and plan further ahead for better efficiencies. RV wholesale unit shipments of approximately 73,300 units decreased by 20% or more than 18,000 units from the third quarter of 2022. We currently estimate third quarter retail registrations were approximately 105,800 units, an estimated decline of approximately 13% compared to the third quarter of 2022. The metrics we have outlined imply a net decrease in dealer inventories of approximately 32,500 units during the quarter and approximately 78,000 units year-to-date. Our estimates indicate that the TTM dealer inventory weeks on hand at the end of the third quarter of 2023 have declined to approximately 12 to 14 weeks from 19 to 21 weeks at the beginning of fiscal 2023, and 16 to 18 weeks at the end of the second quarter of 2023. This is well below historical levels of approximately 26 to 30 weeks. From a model year mix perspective, as it relates to the current dealer inventory levels, we believe the ratio of prior model year units that currently sit on dealer lots reflects a more normal relationship compared to what we experienced over the first half of the year. For context, we estimate just 300,000 model year '23 units were built versus an estimated 650,000 model year '22 units. Our marine revenues, which represent 24% of our third quarter 2023 consolidated sales, decreased 24% to $205 million on wholesale shipments that are estimated to have declined 23% in the quarter. We believe dealer inventory restocking reached an equilibrium toward the end of the quarter and marine OEMs and dealers are acting in a very disciplined manner as they manage the slower part of the selling season with a model year inventory mix that appears close to normal. As noted, we estimate marine wholesale unit shipments were down 23% in the quarter to approximately 35,000 to 40,000 units on retail unit shipments that were up 1% to a range of 45,000 to 50,000 units. We estimate more than 20,000 units were taken out of inventory in the second quarter of 2023 and more than 10,000 units in the third quarter of 2023. Our estimated marine content per wholesale unit increased 3% and on a TTM basis to $5,009 compared to the same period of 2022. We estimate overall dealer inventories are at approximately 20 to 22 weeks on hand at the end of the third quarter, decreasing from an estimated second quarter level of 23 to 25 weeks, historical averages weeks on hand approximated 35 to 40 weeks. Revenues in our housing market decreased 18% to $261 million and represented 30% of our consolidated sales. The housing side of our business is primarily tied to manufactured housing, single, and multifamily housing with manufactured housing making up 56% of the total. MH estimated wholesale unit shipments were down 22% in the quarter while total residential housing starts for the third quarter decreased 6% and single-family starts increased 7% and multifamily starts decreased 28%. Our estimated MH content per unit increased 8% to $6,498 on a TTM basis compared to the same period in 2022 as a result of market share gains. Our team has continued to make consistent CPU gains as we collaborate with OEMs as they strive to exceed sustainability and energy efficiency guidelines. Manufactured homes continue to offer an accessible and cost-effective solution compared to site-built homes, particularly in the face of the acute affordable housing shortage we are experiencing today. Further, we believe our housing businesses have significant long-term potential given the structural and supply-demand imbalances that continue to plague consumers searching for affordable housing alternatives. As noted, the overarching theme of higher interest rates is affecting both dealer floor plan costs and consumer monthly payments across our markets. We continue to be optimistic about the earning power of our business, especially given our past and present cost reduction initiatives and see interest rate stabilization as a potential tailwind. As we look at the opportunity landscape from new product introductions, market share gains, and the scalability of our RV business to our highly engineered suite of products in our marine portfolio which includes both design capabilities and our portfolio of aftermarket solutions we offer to a larger used boat market, we remain confident in our outdoor enthusiast business and their targeted future growth. We expect to continue to invest in these spaces and believe in the industry's long-term health. Additionally, our teams are constantly modeling future scenarios in our markets giving us the ability to react quickly on our plans as markets and the economy dictate. Moving to our growth objectives. Our team remains focused on evaluating acquisitions in our current pipeline while adding potential targets for future consideration. These targets include businesses within our current end markets with similar product offerings, those that might be in adjacent markets, and those that add new products and services to our portfolio. While we continue to pursue tuck-in acquisitions, we also carefully consider larger acquisitions that align with our long-term vision and strategic objectives. We have a track record of identifying and integrating accretive acquisitions and continue to have a full pipeline of potential targets. Any acquisitions we complete will operate within our brand forward go-to-market strategy. Related to capital allocation, we continue to invest in our automation and innovation efforts as we further refine our operational and production processes. An example of these investments is our expanded use of robotic solutions through robots as a service, which allows us to structure our capital spending more efficiently on targeted automation efforts while mitigating operational risk. We were impressed with the results from the initial autonomous robotic cell and its capabilities to complete multiple surface treatments on composite parts. We launched the first standing cell application in 2023 and are now implementing robots as a service cell across multiple business units. We will continue to expand our scalability and operational efficiencies, including through ongoing efforts to seek out and develop new solutions for a broad range of manufacturing capabilities. Our customer-focused brand-led go-to-market strategy extends to customization and collaboration as we work in partnership with our valued customers to build innovative and compelling products and solutions to improve the end customers' experience. As an example of this is the Harley-Davidson audio powered by Rockford Fosgate partnership. This partnership between two legendary brands cements Rockford as the leading provider of high-performance branded audio for Harley-Davidson enthusiasts. Our teams do a tremendous job of collaborative innovation and partnership with our customers while offering high-quality customization and full solutions product offering. As Andy noted, we are expanding our product innovation through Patrick's Advanced Products Evolution group, a team committed to enhancing the solutions we can offer to our valued customers.

Thanks, Jeff, and good morning, everybody. Our consolidated third quarter net sales decreased 22% or $246 million to $866 million, driven by a 20% decrease in RV shipments, a 23% decrease in marine shipments, and a 22% decrease in manufactured housing shipments. Gross margin increased 170 basis points to 23%, which was the result of our strategic diversification, acquisitions, cost reduction initiatives, investments in automation and continuous improvement, and operational efficiencies. Warehouse and delivery expenses declined $2 million to $38 million in Q3 2023, increasing 70 basis points as a percentage of sales due to lower revenue and partially due to acquisitions completed this year. SG&A expense declined $14 million or 17% to $71 million in the third quarter of 2023. SG&A increased 60 basis points as a percentage of sales on lower revenue. Additional factors included higher insurance, software and technology, and nonrecurring reorganization expenses. Operating income decreased $22 million. Our operating margin remained resilient, decreasing just 10 basis points to 8.2%, driven by the previously described factors. Net income decreased 33% to $40 million, which equates to $1.81 per diluted share. Adjusted EBITDA was $113 million versus $131 million last year. However, adjusted EBITDA margin increased 130 basis points to 13.1% for the third quarter of 2023. Our overall effective tax rate was 27% for the third quarter compared to 24.1% in the prior year. We continue to estimate our overall effective tax rate for 2023 to be approximately 25% to 26%. Looking at cash flows, cash provided by operations for the first nine months of 2023 was approximately $294 million, an increase of $64 million or 28% compared to approximately $230 million in the prior year's period. As Andy noted, our solid financial results, coupled with our prudent balance sheet management, have resulted in strong cash flow. This quarter, capital expenditures were $11 million, as Jeff noted, we continue to invest in our operations to drive innovation, efficiencies, and long-term value for our customers and stakeholders. We continue to expect CapEx to range from $65 million to $70 million in 2023. During the quarter, we generated operating cash flow of $115 million, implying free cash flow during the quarter of $105 million. For the trailing 12-month period, we generated $412 million of free cash flow compared to $250 million for the same period last year. We remain committed to our disciplined capital allocation strategy. At the end of the third quarter, after paying down $112 million on our debt, including $110 million on our revolving credit facility, we had approximately $700 million of total net liquidity comprised of $17 million of cash on hand and unused capacity on our revolving credit facility of $683 million. Total net leverage was 2.5 times. We continue to see the tangible results of our cost, balance sheet, and financial management. With no major debt maturities until 2027 and approximately $700 million of liquidity, we have a solid financial foundation to capitalize on opportunities and successfully navigate current and future market conditions. We returned $10 million in the form of dividends during the quarter. We remain opportunistic on share repurchases and have $84 million left authorized under our current plan at the end of the third quarter. Moving to our end market outlook. We continue to expect higher interest rates to negatively impact dealers' willingness to hold inventory during the fourth quarter. As Jeff discussed earlier, RV retail registrations have exceeded wholesale shipments during the quarter and the year-to-date period, implying a significant reduction in the number of units on dealer lots. This has been the result of continued discipline by OEMs and dealers and positions the industry favorably for 2024. Based on recent trends, we currently estimate full year RV retail registrations will be down approximately 15% to 17%, implying retail registrations of approximately 370,000 to 380,000 units. Assuming consistent dealer weeks on hand levels, as Jeff noted, this approximates based on our retail estimates full year 2023 RV wholesale unit shipments of 300,000 to 310,000 units, implying a decline of approximately 37% to 40% from 2022. For 2024, we currently estimate wholesale and retail unit shipments at 350,000 units. In our marine market, we estimate 2023 wholesale shipments will be down 15% to 17%. We continue to believe dealer inventories are calibrated. However, as noted, dealers are acting with an abundance of caution, given higher floor plan costs as we head into the winter. Retail has outperformed our expectations, and we currently estimate retail registrations will decline 5% to 10% for 2023. For 2024, we currently estimate marine retail and wholesale will be down 15%. On the housing side of the business, we continue to expect MH wholesale shipments to be down 20% to 25% for 2023 with retail sales absorbing available wholesale production on a real-time basis. In our residential housing end market, we expect 2023 new housing starts will be down 10% to 15%. We currently expect the housing market to be flat in 2024, and that MH will be up 10%. We estimate our full year 2023 operating margin will be between 7.5% and 7.8% and continue to expect to generate operating cash in excess of $400 million this year as working capital lines of revenues, implying free cash flow of $330 million or more based on our CapEx estimates. That completes my remarks. We are now ready for questions.

Thank you. At this time, we'll be conducting a question-and-answer session. Thank you. Our first question comes from the line of Scott Stember with Roth MKM. Please proceed with your questions. Mr. Stember, perhaps your line is muted. Live for questions.

Sorry about that. Yeah, I forgot where the mute button was. Sorry about that. Could you guys talk about apparently a little bit of a stalemate going on with dealers and OEMs, whether it's pricing on '24 product or dealers looking for some help on floor plan? Could you just maybe talk about what you're hearing? Has there been any movement on that front on the order process? And when would you expect that to start to break through a little bit?

Yes, Scott, this is Jeff. Really coming out of Open House, we didn't expect a lot of orders immediately from the Open House, more of a planning between OEMs and dealers, how they wanted to spread their orders between the fourth quarter and getting into the selling season of the first quarter. So we've continued to see production levels pretty consistent through the end of the third quarter into the fourth quarter. We will see some shutdowns around Thanksgiving and Christmas, pretty traditional from what we've seen in the past. We expect that with the dealer inventory levels at the level that they are currently, we'll see some upside going into the first quarter based on their need to have product for the selling season. The OEMs continue to remain disciplined with their production levels, which I think is managing the inventories out in the field and putting them in a really good position as we move forward.

Got it. And then on the aftermarket side of the business, can you maybe talk about how that performed in the quarter, mainly in Marine, I suppose, and off-road vehicle and just talk about the prospects for next year, particularly if we are going into some form of a recession.

Sure, Scott, this is Andy. I think our aftermarket business was slightly down, which has been consistent for much of the year. However, the margin profile for that business remains very strong. It's performing better than we expected regarding margins, which is part of the benefit we've seen from the aftermarket. We are optimistic, especially considering the trends related to discipline and the current financing environment for purchasing new units. We anticipate that the aftermarket will take on a more counter-cyclical role for users upgrading their units with aftermarket products. So, overall, while it has been down a bit, it has held up well from a margin perspective, and we feel good about it.

Just the last question, there's a lot of news about one of your top RV customers starting to bring some functions in-house and becoming more vertically integrated. Can you discuss how that would affect Patrick and what we can expect from a content impact going forward?

Sure. As we examine our product portfolio, we have a range of offerings categorized as good, better, and best. We anticipate continuing our collaboration with our customers and are encouraged by the innovations we see across the industry. This momentum is particularly exciting for our advanced product evolution group as we work closely with customers to develop products together. We face competition in all our product categories, and we intend to remain competitive within those categories. Overall, we believe we have strong partnerships with the OEMs in our sector.

Got it. That's all I have for now. I'll jump back into the queue.

The next question is from the line of Daniel Moore with CJS Securities. Please proceed with your question.

Thank you. Good morning. Thanks for all the color. Maybe shift gears toward the margins. Gross margins are remarkably strong given the current level of demand. Do you expect to maintain those levels as we look to Q4 and into maybe H1 fiscal '24? Or are you seeing any pricing pressure work its way back to the supply chain at this stage?

Yes. Dan, this is Andy. I think as it relates to the margins, we expect a little bit of choppiness in Q4. It typically is one of the softer quarters seasonally for us. And we would expect just a little bit of choppiness as it relates to that, but that's built into our model. I think as we look at 1H 2024, we're still feeling like our margin profile is solid. The investments that we've made in automation without question are paying off. Our team has done a fabulous job of managing the labor force. We've also sized the businesses according to the revenue stream that we're seeing today. So I think when we look across the spectrum in all of our businesses and we look at where the industries are at, we feel like we've modeled the business to that platform and can flex up or down if we need to. But the leverageability going up for us will be solid. But I think as we look at our gross margins, a lot of the investments. The team has just done an absolutely fantastic job of managing the business, taking out costs, relying on the automation to generate throughput and efficiency and then continuous improvement initiatives that we've implemented across the spectrum continue to help drive those. So we're going to stay focused on that. And the goal would be to continue to, again, drive efficiencies and throughput and then really be able to leverage when we see the markets pick up.

Excellent. I appreciate your detailed outlook for each of the verticals as we consider next year. Regarding the timing, do you anticipate a significant difference in shipments from the first half to the second half of the year? Will we see a slower start before a ramp-up in any of the three main businesses, or will results remain relatively steady throughout the year?

I think what we expect is a more normal seasonality than we've seen in the past as it relates to production and retail. And I think when you kind of look at where inventory is at today, low, low level of weeks on hand, dealers being very, very thoughtful about the inventories that they're carrying. The OEs matched up to be able to produce. We would expect a more seasonal cadence. But again, like I said, I think we're balanced with what we see today as it relates to production levels and sized appropriately. So as we look at it, what I would tell you is we're watching retail certainly. But with the balance and the calibration that we see in the field today, between manufacturing, production, and retail, we feel really good about the ability to flex across the spectrum.

Excellent. Last one, I'll jump out. Free cash flow has been exceptional. Is there any more working capital left to unwind? Or should we expect it to be more neutral going forward, at least until demand starts to recover?

Yes. I think that from a working capital perspective, our team, again, has done an absolutely fantastic job of managing inventories in partnership with our customers. And I don't know that there's a ton of working capital to ring out. We do expect to have over $400 million of operating cash at the end of this year, which is really in line with where our expectations were at. In fact, I think, as we look out into the future, one of the things that we're in a really advantageous position as it relates to the strength of our balance sheet in our liquidity is we're looking and saying, okay, if the manufacturing does go up, we want to make sure that we're positioned and we can be positioned with the appropriate levels of inventory when it does flex up. So we're talking to our OEM partners today about production and where their expectations are to make sure that we're positioned to be able to flex up if we need to add some working capital. So again, I think across the platform, our team has done a fabulous job of managing working capital.

Thank you. Our next question is from the line of Mike Swartz with Truist Securities. Please proceed with your questions.

Hey, good morning, guys. Maybe just to start on the commentary around your outlook for the marine market for 2024. I think if I heard you right, you said you expect retail to be down 15%. I think that's one of the more bearish views I've heard, and I think that would put us right on the cusp of kind of the depth of great recession demand levels. So maybe just a little color on maybe how you're thinking about the year in Marine and how you got to that number?

Sure, Mike. This is Andy. I think as we look out, right now, we feel, again, that production and retail are very well aligned to kind of one-for-one. We're being cautious. As we noted, marine retail has been stronger than we expected. So I would tell you that we're being cautious in modeling our business around that number. We certainly think that there's some upside potential as you look at the numbers that are there, but we want to make sure that we're thoughtful, as I talked. Our business is balanced as it relates to the revenue stream matched against our cost structure. And so as we look at Marine right now, production levels that we're seeing, there is tremendous discipline. So we're not concerned about overinventory or the ability to produce. We're just staying cautious as it relates to what it could look like in this environment, and that's how we are building our model with upside potential to flex very easily in the event that shipments are better than that. So we've got a cautious outlook, but the caution is just simply around where we're centered today and the ability to flex up very quickly if we need to.

Okay, that's perfect. We've heard about model year '24 pricing in RVs, particularly in towables, experiencing declines in some cases by double digits. There's discussion about reducing features to reach these price points. Can you provide insight into what you're observing? Additionally, how much risk do you think this reduction in features poses for Patrick concerning your content loads moving forward?

Yeah, Mike, this is Jeff. What we've really observed after the model change isn’t so much a reduction in content, but rather the introduction of smaller floor plans to target the lower end of the market. We have seen more of this reflected in production levels recently, particularly toward the end of the third quarter and into the fourth quarter. In that regard, it's not so much about de-contenting but rather less content in some of the units being built on the smaller side. From Patrick's perspective, I believe we are in a good position with our content per unit, mainly due to the business we've gained and the market share we've captured over the last year. Our team's efforts have been remarkable, resulting in significant growth of about $150 million in that period. This growth should really balance out any impacts from the lower-end units, and for our standard units, we haven’t experienced much de-contenting. Overall, we feel quite confident about our current standing.

And clarification, that $150 million is something that you anticipate going forward? Or is that something that's already been realized?

Annualized.

Okay. Perfect. And then just one more for me, if you will, just the typical breakout between M&A, share price, and I think you said industry volume was off 22%. So that's easy.

Yes. Mike, this is Matt Filer. So the 22% revenue decrease that we saw in the quarter. As you mentioned, the industry is down across our end markets, about 21%. Our net organic impact is down 3%, and then acquisitions had a positive 2% impact. If you break down that organic impact, pricing is down 5% and pure organic growth is up 2%.

Awesome. Thank you so much.

Thank you.

Our next question is from the line of Noah Zatzkin with KeyBanc Capital Markets. Please proceed with your questions.

Hi. Thanks for taking my question. Most of my questions have been asked and answered, but just hoping you could provide some color on how you're thinking about M&A in the current environment and valuations.

This is Andy. I feel confident about our current positioning regarding liquidity and leverage, which allows us to actively assess and consider acquisitions. Our pipeline remains strong, both from organic growth and incoming deal opportunities. While the flow of deals from external parties has slowed, we continue to focus on the organic opportunities available to us. In terms of valuations, we see them as stable. The main issue is the disconnect between normalized run-rate expectations and valuation perceptions currently. However, we believe we're well-positioned to pursue acquisitions if we choose, given our liquidity and leverage situation. We plan to capitalize on emerging opportunities while also actively seeking out potential acquisition targets.

Thank you. Our next question is from the line of Craig Kennison with Baird. Please proceed with your questions.

Good morning. Thanks for taking my question. Many have been addressed already, but I wanted to circle back on content per unit. Came in a little above where we had anticipated, but I know it's an LTM metric. And I'm wondering, as you look into 2024, what's a reasonable expectation for content per unit in RV and marine specifically?

Yes, Craig, this is Jeff. We feel like in through the fourth quarter and into the first part of the next year, our content per unit is going to remain relatively flat from where we are. There will be some pricing movement in a few areas, maybe down and some up. But certainly, some of the increased market share we've been able to gain is going to offset anything that we see in the pricing.

And that flat as a comment relative to your Q3 experience?

That's correct.

Okay, thanks. Looking ahead to 2024, although it’s still early, what factors are you considering regarding the margin profile of your business? Also, can you comment on whether labor rates are affected by the UAW contract or any other pressures in the environment?

Yes. Craig, I think as we look out into '24, again, we feel good about our cost structure today with where we're at. We actively partner with our customers from a pricing perspective as commodities move up and down and work very well with them in partnership from my perspective. So as we look at those, that component, the labor side of the business is very stable for us. We've got a great core group of labor, talent out there that is doing a fabulous job that is flexible and nimble. So we feel good about that. I think as we just look at the model today and where we're stabilized and looking out in the future and positioned, I think we look and say, okay, we're in a good spot. We can flex up very quickly and leverage off of that. And if we need to take some more cost out, we certainly can do that and we'll do that very prudently. So overall, as we look at the cost structure and the puts and takes, I feel like we can continue to be very flexible and nimble with our business model. Our team is just really good at that.

Great. Thank you.

Thank you. Our next question is from the line of Griffin Bryan with D.A. Davidson. Please proceed with your questions.

Yeah, thanks. Just one for me. So in terms of the enhanced dealer inventory for both marine and RV, do you think this returns to its historical norm, or are these current levels a new run rate going forward over the medium to long-term?

Griffin, we're planning our business around the current weeks on hand levels, which we believe are obviously very low given the interest rate environment. We certainly appreciate the prudence that both OEMs and dealers are using today to minimize floor plan financing costs. From our perspective, we're at a low level of weeks on hand, lower than we would have anticipated. But it's been calibrated from our perspective. And so I think our modeling is centered around consistent weeks on hand. We're not planning anything up. If it does go up, then we would expect some restocking and we will certainly participate in flex with that. But right now, we're building our model off of consistent weeks on hand.

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

I want to end the call by once again expressing my sincere gratitude to our talented team members who are the reason for our success. Their dedication and commitment are instrumental to Patrick continuing to be a customer-focused supplier that empowers enthusiasts on the road, on the water, and at home. We find inspiration in the resilience displayed by our team despite the wide range of market and industry changes we've seen in the past few years. This resilience gives us the confidence that we can navigate any challenges that come our way, and we will continue to utilize our operational and financial levers appropriately to drive sustainable growth and deliver long-term value to our shareholders. We thank everyone who has joined us on the call today.

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