Good morning, ladies and gentlemen, and welcome to Patrick Industries First Quarter 2024 Earnings Conference Call. My name is Darryl, and I'll be your operator for today's call. Please note that 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 RV; and Andy Roeder, CFO; Kip Ellis, President, Powersports Technology and Housing; and Matt Filer, SVP, Finance, is also here for Q&A. 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 2023 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. As we finished the first quarter of the 2024 fiscal year, Patrick remains in a position of strength, as a result of the work our team has put in day in and day out and the strong performance and results that we have generated while diligently managing our business and balance sheet. Our success would not be possible without the dedication of our incredible team members, and I thank them for their tremendous efforts and focus. Our family of trusted, independent brands building better component solutions is guiding our model as we strive to be the supplier of choice in the outdoor enthusiast and housing markets. Our accretive growth strategy has evolved over the years through our team's relentless pursuit of great customer service and building innovative high-quality product solutions. We have become a key supplier to RV, marine, manufactured housing and now Powersports OEMs alike, and we believe our ability to scale and adapt to our customers' needs is unmatched. As we have further refined our business objectives, we identified and executed on the appeal of a more diversified end market ecosystem, which is proving resilient, especially in these uncertain market conditions. Our first quarter acquisition of Sportech further solidifies the foundation in the Powersports industry and serves as another platform for future strategic and organic growth. We are excited by the promising potential in this space, particularly in the utility side-by-side segment on which Sportech focuses. The Sportech acquisition brings in a team aligned with our purpose as passionate outdoor enthusiasts dedicated to creating highly engineered, innovative products in close partnership with our valued OEM customers. We are thrilled with the initiatives that Patrick and Sportech teams have already set in motion and the future growth potential we see ahead of us. Examples of our drive to immediately deliver synergies post-closing involves our team at Rockford Fosgate hosting Sportech to showcase the benefits of being connected to the Patrick ecosystem and how our businesses are able to collaboratively leverage their processes and expertise, bringing additional value to their respective customers. We also invited our key plastics, metals, and harness and dash businesses to Sportech for a brainstorming session, including a production line walkthrough to identify avenues of opportunity between business units, their best practices, and potential areas for collaboration, including logistics, sourcing and material synergies. While collaboration remains a crucial tenet of our success through our business model, we strive to maintain each business's individuality and passion as they drive forward, keeping the entrepreneurial spirit alive. We believe this strategy is key to our future success and empowers our businesses and the collective Patrick family to achieve new heights. We continue to seek out entrepreneurial businesses with strong, culturally-aligned leadership teams, solid organic growth prospects and accretive margins. Our ability to execute at the operational level at our brands exemplifies our balance sheet and working capital management, for which we all have accountability. Our team has done a great job of working with our customer partners to manage our inventories and ensure we also remain focused on delivering strong cash flows while maintaining a disciplined leverage position. Our inventories are balanced and well maintained, and our leverage position has already improved from just two months ago, following the Sportech acquisition, the largest acquisition in the company's history. Now moving on to our financial results. Our first quarter revenues increased 4% to $933 million. And on a trailing 12-month basis, our consolidated revenues were approximately $3.5 billion. Our net income in the first quarter improved 16% to $35 million, and net income per diluted share was $1.59. Excluding acquisition transaction costs and purchase accounting adjustments, our first-quarter adjusted net income was $39 million and adjusted diluted earnings per share grew 31% to $1.79. Our team continues to anticipate and adjust to market and macroeconomic forces through the management of our highly variable cost structure, and our model performed well during a seasonally slow period, also as a result of acquisitions completed over the past year, operational efficiencies gained through automation and better throughput and our diversification among other items, as shown by our continued solid margin performance. Excluding acquisition transaction costs and purchase accounting adjustments in both periods, operating margin improved 70 basis points to 7.0% and adjusted EBITDA margin increased 110 basis points to 11.9% in the quarter. On an administrative level, I'd like to welcome Andy Roeder, our new CFO, who joined us in March. Andy has tremendous experience in the outdoor enthusiast space and brings his impressive skills and expertise into the Patrick family. We're pleased to have Andy on our team supporting our businesses' growth objectives while ensuring our balance sheet and financial foundation remains strong. I'd also like to thank Matt Filer, who filled the interim CFO role with confidence in execution and helped us successfully deliver on our operational and strategic plans. Matt has resumed his role as Senior Vice President of Finance, and we look forward to his continued contributions. I'll now turn the call over to Jeff, who will highlight the quarter and provide more detail on our end markets.

Thanks, Andy. Good morning, everyone. We continue to experience dynamic conditions across all of our primary end markets. RV and MH trends have improved modestly after reaching what we believe was the bottom of the cycle in 2023. While shipments have improved in the market, interest rates continue to negatively impact demand for our end consumers and dealers across our markets as ownership and online costs remain relatively high. As a reminder, in the outdoor enthusiast space, RV has historically been the first market to enter and exit economic cycles, and the RV market typically precedes the recovery in marine and Powersports. In the first quarter, RV wholesale shipments have seen some sequential and year-over-year improvement. We expect these positive trends to continue in the near term, given the need for additional inventory and preparation for spring selling season and the coming 2025 model year change. However, the durability of positive trends will depend on retail sell-through. Our first quarter RV revenues increased 15% to $421 million when compared to the same period in 2023 and represented 45% of consolidated revenue. RV content per unit on a TTM basis was $4,859, down by about 9% from the record level we achieved for the first quarter of 2023. On a positive note, RV content per unit on a TTM basis increased sequentially in Q1 of 2024 from Q4 of 2023. According to the RVIA, RV wholesale unit shipments increased 9% to approximately 85,900 units from the first quarter of 2023. We currently estimate first quarter retail registrations were down approximately 14% to an estimated 73,100 units in the quarter. Our estimates further indicate that TTM dealer inventory weeks on hand at the end of Q1 of 2024 have increased by 2 to 3 weeks to approximately 20 to 22 weeks as dealers plan for the upcoming selling season. This is well below the historical averages of approximately 26 to 30 weeks. On the marine side of our business, OEMs have remained very disciplined in their production, which will help lessen the response time between inventory sell-through and replenishment in the eventual recovery. We expect to see our marine business bottom out in Q2 and then begin to stabilize in Q3 and into Q4, especially as consumers and dealers await the new model year product. We believe in the long-term durability of the marine industry as outdoor enthusiasts continue to see the appeal of boating and spending time on the water with family and friends. Our first quarter marine revenues were up 35% to $155 million, representing 17% of consolidated sales. This change in sales is in line with our expectations in the quarter, especially when considering our mix toward ski and wake and pontoon. We estimate wholesale powerboat unit shipments declined 34% to approximately 38,400 units from Q1 of 2023, with estimated ski and wake and pontoon unit shipments down approximately 52% and 41%, respectively. We currently estimate first quarter retail powerboat shipments were down approximately 10% to an estimated 31,200 units. Our estimated marine content for wholesale unit on a TTM basis was $4,049 compared to $4,433 in the same period last year. On a sequential basis, our first quarter content was roughly flat compared to Q4 of 2023. It is important to note that in the prior periods, we reported both marine and powersports revenue in our marine market, impacting both our marine revenue and content per unit. The current and prior-year figures have been recalculated for revenue and content per unit to reflect these adjustments. Our estimates indicate that the TTM dealer inventory weeks on hand at the end of Q1 of 2024 have increased approximately 2 to 3 weeks to an estimated 30 to 32 weeks. This is well below the historical average, which we estimate at 36 to 40 weeks on hand. Our housing businesses, both MH and residential site-built, demonstrated the resilience of our diversified platform and remained steady and performed well despite the headwinds in interest rates as consumer demand for affordable housing remains strong. Multifamily housing continues to experience softness, while single-family housing starts have improved. In Q1, our housing revenue was up 5% to $275 million, representing 29% of consolidated sales, and manufacturing which represents approximately 57% of our housing revenue in the quarter, we increased the content per unit on a TTM basis by 1% to $6,422. We estimate MH wholesale unit shipments increased 13% in the quarter, and total residential housing starts for Q1 improved 1%. As we begin reporting on powersports business, our focus will primarily be on the side-by-side, golf cart, and motorcycle sectors of the industry, and our market commentary will reflect this focus. Powersports is a broad space. And unlike our other end markets, there is no third-party source for industry-wide data on wholesale shipments. Although our focus has shifted to the side-by-side space, which includes golf carts, following the Sportech acquisition, we have had a presence in side-by-side and motorcycles, primarily through Rockford Fosgate's premium audio offerings. Of course, as we expand our presence in this space, the metrics we track will evolve along with our commentary to more accurately reflect our business within the industry. Ultimately, our intention is to provide business-relevant insight into the markets we serve, then providing an outlook on the broader powersports industry as a whole. Anecdotally, powersports dealer inventory levels appear elevated, particularly in the recreation segment, however, on the utility side of the industry, demand appears to be more resilient. This, coupled with Sportech's promising backlog, supports our optimism as we move into this year and beyond. The demand for creature comforts like HVAC requires the doors and closure enclosures for tech manufacturers. With the potential to add audio and other high-value product solutions we produce down the road, both to the OEMs and in the aftermarket. Our Powersport revenues were $83 million in the quarter, which represents 9% of our first quarter 2024 consolidated sales, including approximately two months of Sportech revenue, which outperformed expectations. On the innovation front, our dedicated advanced product group, which we highlighted in the fourth quarter is off and running and remains intensely focused on collaborating with OEM customers, evaluating best-in-class solutions two and three model years out, in the RV, marine and powersports market. We believe we are well-timed with this strategic initiative as OEMs generally focus inward on product design and evolution during periods of softer retail demand. Two examples of our leading innovations as a testament to our progress, Patrick's brands won two innovation awards this year at the Discover Boating Miami International Boat Show in February. TACO Marine won an innovation award for their open-water internal and collapsible carbon fiber outrigger poles. Their sleek design and increased functionality results in more natural movement of bait in the water. We continue to believe both RV and boating experience can be enhanced through the use of carbon fiber products, which we have launched along with the potential of our outdoor enthusiast market. SeaDek also won an award for their patented lighted SeaDek, which can embed RGB lighting into their products providing additional opportunity for customization in marine flooring and padding. The sliding takes the superior traction of EVA foam decking, coaming pads, and step pads, SeaDek is known for to a whole new level of comfort and visual appeal. I'll now turn the call over to Andy Roeder, who will provide additional comments on our financial performance.

Thanks, Jeff, and good morning, everybody. First, I'd like to thank Andy, Jeff, Matt, and the rest of the team here for such a warm welcome. I'm thrilled to become part of the Patrick family at such an exciting time, and I'm ready to work with the stellar team here, maintaining our solid financial foundation and supporting Patrick's continued drive toward profitable organic and strategic growth. Now on to our financial results. Our consolidated first quarter net sales increased 4% to $933 million, driven by 9% growth in RV wholesale shipments, an estimated 13% increase in manufactured housing wholesale shipments and our acquisition of Sportech which together more than offset the impact of an estimated 34% decrease in marine wholesale powerboat unit shipments. Gross margin increased 30 basis points to 21.9%, which was the result of our strategic diversification, acquisitions, larger mix of higher engineered products and cost reduction initiatives, coupled with our investments in automation and continuous improvement initiatives. The first quarter gross margin includes 10 basis points of non-cash purchase accounting charges from the inventory step-up related to the Sportech acquisition. SG&A expenses increased $3 million or 3% to $85 million in the first quarter of 2024, but decreased 10 basis points as a percent of sales. The year-over-year increase in expense reflects transaction costs related to the Sportech acquisition. Excluding the nonrecurring acquisition transaction costs associated with the Sportech acquisition, SG&A expenses as a percent of sales decreased 60 basis points versus the quarter of 2023. Operating expenses were $146 million in the quarter compared to $138 million last year, primarily due to higher amortization costs and the impact of acquisition-related expenses on SG&A. Operating income grew $3 million to $59 million, while operating margin improved 20 basis points to 6.4%. Excluding acquisition transaction costs and purchase accounting adjustments related to acquisitions, adjusted operating margin improved 70 basis points to 7% in the first quarter. The improvement in operating margin was driven by higher revenue from our RV and housing businesses, coupled with the acquisition of Sportech among other factors previously discussed. These positive factors, while partially offset by the impact of lower marine revenue and higher amortization expense again reflected benefits of our strategic diversification. Net income increased 16% to $35 million, which equates to $1.59 per diluted share. Adjusting for the acquisition transaction costs and purchase accounting adjustments in both periods, adjusted net income improved 29% to $39 million or $1.79 per share. Our reported and adjusted EPS for the first quarter of 2024 include approximately $0.01 per share in additional accounting-related dilution from our 2028 convertible notes. We have hedges in place which are expected to reduce or eliminate any potential dilution of the company's common stock upon any conversion of the convertible notes and/or offset any cash payments, that companies are required to make in excess of the principal amount of any converted notes. For reporting purposes, these hedges are always anti-dilutive and therefore cannot be included when reporting earnings per share. Adjusted EBITDA grew 14% to $111 million versus $98 million last year. Adjusted EBITDA margin expanded 110 basis points to 11.9% for the first quarter of 2024. Our overall effective tax rate was 10.6% for the first quarter compared to 20.1% in the prior year. The decrease in the tax rate in the first quarter was due to the tax benefit related to the vesting of share-based awards and the increase in Patrick's stock price. We expect our effective tax rate to be approximately 22% to 23% for the full year, implying 25% to 26% for the next three quarters. Looking at cash flows. Cash provided by operations for the first three months of 2024 was approximately $35 million compared to an outflow of approximately $1 million in the prior year period, primarily due to working capital management and stronger net income. This quarter, purchases of property, plant and equipment were $15 million, reflecting maintenance CapEx, automation projects and select facility improvements. We remain committed to allocating capital to our automation initiatives as we reinforce innovation, efficiencies and long-term value for our customers and stakeholders. We estimate our 2024 capital expenditures will total $70 million to $80 million. Our goal is a disciplined capital allocation strategy, and we continue to evaluate possible organic growth initiatives while maintaining a robust acquisition pipeline. We plan to continue to assess these growth initiatives while maintaining a strong balance sheet with ample liquidity. Our net leverage at the end of the quarter was 2.8x, down from 2.9x on a pro forma basis at the closing of Sportech in January. During the quarter, we generated $20 million of free cash flow. For the trailing 12-month period, we generated $391 million of free cash flow compared to $352 million for the same period last year. At the end of the first quarter, our total net liquidity was $413 million, comprised of $18 million of cash on hand and unused capacity on our revolving credit facility of $395 million. With no major debt maturities until 2027, we continue to have the balance sheet strength, flexibility and liquidity to remain on offense and assess the potential to seize profitable strategic growth opportunities as they arise. We returned $13 million in the form of dividends during the quarter. We will remain opportunistic on share repurchases and have $78 million left authorized under our current plan at the end of the first quarter. Moving on to our end market outlook. We continue to expect the current interest rate environment to negatively impact consumer demand and dealers' willingness to hold inventory during the year. Based on recent trends, we estimate full year RV wholesale unit shipments will approximate 320,000 to 340,000 units as dealers remain cautious about the carrying cost of inventory in this rate environment. We currently expect full year RV retail shipments to be down approximately 5% to 10%, implying approximately 350,000 units at the midpoint. In our marine market, we estimate 2024 total industry retail will be down 5% to 10% and wholesale units for our overall product mix will be down 10% to 15%. In our Powersports end market on a pro forma basis, including Sportech, our full year 2023 revenue was $385 million, and we estimate powersports unit shipments in our product categories will be flat in 2024. For modeling purposes, we expect to gain organic content in the mid-single digits. On the housing side of our business, we estimate MH wholesale unit shipments will be up 5% to 10% for 2024, with retail sales absorbing available wholesale production on a real-time basis. In our residential housing end market, we estimate 2024 new housing starts will be flat to up 5% versus 2023. Given the current end market outlook we've outlined, we estimate our 2024 operating margin will improve by 30 to 50 basis points on an adjusted basis versus 2023. We estimate our full year 2024 operating cash flows will be between $390 million and $410 million, implying free cash flow of $310 million or more based on our CapEx estimates. That completes my remarks. We are now ready for questions.

Our first questions come from Mike Swartz with Truist Securities.

Just maybe starting out on the outlook. I think one of the biggest changes versus maybe what you talked about a couple of months ago was just on the marine side. So maybe, I guess, just frame up from a wholesale shipment perspective, maybe how you're thinking about the year now versus prior? Is it deeper cuts in the first half, second half is kind of unchanged? Or just maybe any guidelines around how you're thinking about that.

Sure, Mike. This is Andy Nemeth. As we have examined the marine industry and our business mix focused on higher engineered products, particularly in the ski and wake sectors and the pontoon sector, we've noticed that both dealers and OEMs are maintaining a high level of discipline. Therefore, we felt it was wise to slightly reduce our forecasts, particularly in light of recent trends. We observed a decline of more than 50% in the ski and wake segment and over 40% in the pontoon segment during the first quarter. This trend of discipline seems to be continuing into the second quarter, especially as we anticipate the new model year's arrival, though we expect some stabilization in the latter half of the year. Consequently, we've made slight adjustments, particularly regarding our industry-specific focus.

The expectation is that the rate of decline observed in some key categories during the first quarter will carry on into the second quarter. Is this expectation based on a year-over-year comparison, or is there an anticipated improvement on a year-over-year basis? It seems that most of the destocking or restocking occurred in the first quarter of last year.

Yes. We still think that kind of Q1 run rates are going to continue through Q2 at this point in time. So that's really kind of driving that model.

Okay, that's helpful. Regarding the operating margin outlook for the year, you have reiterated your expectations. Do you have any insights on how that might trend throughout the year? Traditionally, the second quarter has the highest margin, with a decline as the year progresses. Considering your comments on marine, which is one of your higher margin sectors, should we anticipate any deviations from this pattern compared to previous years?

We still believe we will see sequential margin improvement, comparing each quarter of this year to the same quarter last year. Our business is well diversified. The marine segment has a strong margin, is highly engineered, and very innovative. With some adjustments in the mix, particularly in our housing business, we aim to achieve a 30 to 50 basis points improvement. If we see an increase in the second half of the year related to the marine business, we expect some margin growth there as well. Overall, we are confident that we will experience improvement in each quarter compared to the previous year's quarters in our financials.

Okay. That's super helpful. And then just one last one for me quickly. Just the revenue growth, the components of that in the quarter on a year-over-year basis, how much was that, I guess, organic volume, pricing, M&A, all that good stuff.

Sure, Mike. This is Andy Roeder. Yes, for Q1, overall industry was down 3%. Acquisition growth was up 5% and organic was up 2%. And that organic is broken down by pricing was down 3% and shared content was up 4%.

Our next questions come from the line of Scott Stember with ROTH MKM.

I imagine that right now, you guys are having discussions on the RV side with the OEMs on where their pricing is going to be looking. Just got off a call this morning with one of the bigger dealers. It sounds like they're not expecting to see a material change in pricing from ’24 to ’25. What are you guys hearing on your end? And how should we look at that from a content standpoint throughout the balance of the year?

Yes, Scott, this is Jeff. As we enter the model year, we adjust our product pricing accordingly. We've noticed that many of our commodity prices have stabilized. As we've mentioned before, we implement pricing changes in real-time based on commodity costs and our inventory levels. Recently, these commodity prices have mostly leveled off during the fourth quarter and into the first quarter of this year. There are some increases and some decreases, but overall, I would describe it as nearly flat. Regarding your earlier comment about the dealer expecting stability, we're observing the same trends with our commodities and the pricing we are offering.

Got it. Regarding the powersports segment, could we explore it a bit more? I understand you’ve mentioned a strong alignment with the side-by-side utility aspect. However, I’d like to get a clearer picture of how much of the powersports business falls into mission-critical categories versus general utility. I'm trying to understand how this segment might perform if the industry experiences a significant downturn this year.

As we analyze the powersports sector, especially in relation to our reach in the market, we are focusing on side-by-side utility vehicles, golf carts, and motorcycles. In the utility sector, we are observing an increase in our content within that market segment. Although the recreational aspect is currently experiencing a slight decline, we remain optimistic about the overall model and the potential to enhance our organic content in various product categories while providing solutions to our customers. We plan to be proactive in gaining market share and increasing our content. While the market may be facing some volatility at this moment, it is important to note that we are strategically positioned in the utility segment.

Got it. And then just last question. There was a comment about expectations for operating margin growth this year. Did I hear 50 basis points? I just want to make sure I heard correctly.

30 to 50 basis points.

Our next questions come from Noah Zatzkin with KeyBanc Capital Markets.

I guess just quick on the RV industry. I noticed you guys kind of ticked down your expectations slightly on the wholesale side. So just wondering relative to a few months ago, what may have led to that?

Yes, Noah, this is Jeff. As we entered 2024, production rates from the OEMs have remained stable through the first quarter and into the second quarter. We believe that under our model, we were initially looking at 330 to 350 units. Interest rates have not decreased, and the Fed indicates they likely won't lower them as soon as we had anticipated. This situation is expected to inhibit dealers from wanting to increase inventory at those higher levels, particularly in the second half of the year. We had hoped that some relief in interest rates might spur a change. We have made a minor adjustment, but it is not significant. We also observe that the OEMs are being very disciplined with their production levels as we approach the model change. As we move into June, they will begin to reduce 2024 production and start focusing on 2025 plans starting in July. Therefore, we anticipate a slight decline during that period. Overall, there's not much change, but we are exercising some caution.

Great. And maybe just kind of two-part. Maybe if you could just kind of talk about how Sportech's performing relative to your expectations early on as well as kind of appetite for other M&A in the near term?

Sure, Noah. This is Andy. Sportech is performing better than expectations so far. We're really pleased with not only the team's performance, but the cultural fit, the alignment, the collaboration we're seeing today. As we noted, we're really striving to execute on synergies very, very quickly and see a ton of runway there. So very pleased with Sportech, and it is performing better than expectations. I think as we look at our appetite for acquisitions, as we noted as well, we are in a position of strength from our perspective. We've got a ton of liquidity. We're managing our cash flows extremely well. Our team is extremely disciplined and doing a fabulous job of working with our customers to manage our inventories and be very thoughtful about that. So I would say our appetite, again, is in a position of strength and to be on offense, and we are actively looking at the acquisition pipeline, continuing to cultivate acquisitions organically. And again, really prioritizing what could make sense at what point in time, but we are actively looking at acquisitions right now.

Our next questions come from Tristan Thomas-Martin with BMO Capital Markets.

Can you just talk how RV content specifically trended in the quarter, maybe not on a trailing 12-month basis, both year-over-year and then quarter-over-quarter. Just trying to square the 9% shipment growth to your revenue being up 15%.

Yes, Tristan, this is Jeff. Sequentially, RV was up about 1% from the fourth quarter of 2023 to the first quarter. So we are seeing that, and we believe that trend will continue through the year.

Okay. I guess just kind of the delta of how you outperformed the industry so much on a shipment standpoint, given there seems to be kind of the ongoing ASP pressure?

Yes. Over the past 15 months, our team has been very active in the marketplace, securing business by collaborating closely with our customers to ensure we can best meet their needs in terms of quality, service, and pricing. We've effectively managed our inventories while also encouraging our vendors to lower commodity costs. As Jeff mentioned, we are actively passing those price reductions on to our customers, which allows us to maintain an excellent balance of pricing, quality, and service for our customer base. Consequently, our RV teams have excelled in gaining more organic content in the RV sector.

Okay. And then just one more, 1Q RV retail to get to year, I believe it was down 14%. That implies a pretty big deceleration in March. Am I thinking about that the right way?

Say it again. I really didn't understand your question.

Yes. So RV retail, I think you called out down 14%. But to get there, that would imply March was down more than both January and February year-over-year. Am I missing anything?

With the estimates, we would tell you it's down a little bit more than January and February, correct.

Our next questions come from the line of Craig Kennison with Baird.

You've addressed many of them, but maybe a follow-on. That last question on the month of March. Any color on April trends in terms of RV demand as we continue to see high interest rates impact the consumer?

From our perspective, the production levels have remained fairly steady through April, consistent with what we have observed this year. Looking ahead to May, we anticipate a slight decrease in production due to the Memorial Day holiday. Overall, the weekly production levels from our customers have remained stable.

Then on the margin front, 30 to 50 basis points. I'm wondering if you can just share any color on the puts and takes to getting there. I know your marine business tends to be higher margin. You've got Sportech rolling through. I'm just wondering if you can help us understand how you get to 30 to 50 basis points with all the ups and downs in your individual businesses.

Craig, this is Andy. There are definitely a lot of puts and takes in the model. When you look at the diversified business model and what we're doing there, I think when you look at the housing business, which is a highly leverageable business, given the low fixed cost structure that's there. That team has done a fantastic job as well really across our organization when we think about the team's performance. They've done a great job of managing that business, but we've also picked up business there on the housing side and the MH of the business. So leveraging that model is certainly supporting the margin profile and really kind of helping offset what we're seeing as it relates to a little bit worse performance on the Marine side of the business, just given what we're seeing in our mix with the products that we're selling through. It is a higher engineered product, a higher-priced product. And so yes, that does have some impact on it. But when I think about just the puts and takes. There's a lot that goes into our model. But when you look at the industries and the industry performance, it's allowing us to be very, very resilient. And then when you look at the acquisitions that we've done, and I'm going to say over the course of the last 24 to 36 months, we're buying margin-accretive businesses that are supporting the model as well. So we look at that margin resilience that we're able to produce it's a combination of a lot of things with the diversification, the acquisition strategy, the team's performance, the automation initiatives that we've put in place, the increased throughput, and increased quality. And then again, just the team's execution in the marketplace and ability to really drive customer value as we strive to be that component solutions provider as a go-to for our customers have all played into the margin profile.

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

Andy, good morning. Welcome to you. Covered a lot of ground. But just on the content side, content per RV ticked slightly higher in Q1 and marine. I think you said flat sequentially. You think we found the bottom from which we can grow on either or both sides or consumers likely to continue to opt for more entry-level units that might keep some pressure on that metric.

As we assess the current content landscape, we believe we have reached a bottom. Although there may be a few minor fluctuations, we expect content to increase sequentially moving forward, particularly with the new business we have acquired. Additionally, we are enthusiastic about the market conditions, as OEM customers are focusing more on innovation and product development. We are actively pursuing various innovations in our product offerings. Currently, we see content stabilizing with some growth from our new business, which makes us optimistic about future potential, especially as we introduce new product solutions and collaborate with our customers on current and future models. In summary, we anticipate continued sequential growth in content, and we are confident that we have hit the bottom.

Thank you for the question. Regarding Sportech and the powersports sector, we've had Sportech under our management for a few months now. I would characterize the opportunities to enhance our content over the next few years as quite promising compared to our initial expectations. We have already conducted several meetings to discuss cross-selling initiatives and internal sales efforts. Overall, I see significant potential in this area moving forward.

Yes. We definitely are excited about the opportunity that exists there. With that team's innovation, again, we talk about advanced products. They've been doing that for a while as well. And so you look at some of the combinations of products that we can bring to market in alignment with what they're delivering today as a product solution and a very sticky product solution. We think that there's a lot of opportunity to bring additional value with our product lines and incorporating those into, again, a higher value-added product for the customer base, for that enthusiast space that we think can be really compelling for the end consumer. So I would say our expectations are at or better than kind of what we anticipated.

Great. And lastly, it does sound like M&A could be on the table given the strong cash flow outlook that you just reiterated, talk about your capital allocation priorities for the next 12 months, debt paydown versus M&A versus maybe potential buybacks, opportunistically.

Yes, definitely. As we consider capital allocation, our primary focus will be on reinvesting in the business. We plan to continue pursuing automation initiatives that enhance throughput and quality, which have proven to be successful for us. We will persist in deploying capital in this area. We also intend to be opportunistic with share buybacks, guided by our established market framework that aligns with our return model. We actively monitor buyback opportunities, regardless of whether we execute in any given quarter. Regarding acquisitions, we are enthusiastic about the current pipeline. We have sufficient liquidity and a solid capital structure to maintain an acquisition strategy, particularly as we monitor our leverage, which we successfully reduced after Sportech and aim to continue doing. We remain opportunistic and are committed to actively pursuing acquisitions.

Our next questions come from Brandon Rollé with D.A. Davidson.

First, just on Sportech, I think you had mentioned expectations for wholesale shipments this year to be flat. What gives you confidence shipments can be flat year-over-year given the state of dealer inventories and also the industry lapping a very strong channel fill year in 2023?

Sure, Brandon. This is Andy Nemeth. As we look at Sportech, again, the utility sector is where Sportech is primarily focused. And when we look at the combination of demand, that exists there today, inventory levels in the channel that we see in the utility side of the business and then the backlog that exists at Sportech. That's what gives us kind of our confidence as it relates to the stability of that business. So again, we see that. That was one of the things that we looked at as we kind of pursued Sportech as well and gained confidence on, but that's really driving that. That utility sector has a solid demand profile to it. And then that coupled with the backlog gives us confidence in Sportech's performance.

Okay, great. I have one more question. It seems that the bidding process for model year '25 in the RV industry has been underway for the last few months. Can you share insights on the competitive landscape, any notable increases in competition, or the potential for OEMs to lower prices due to affordability challenges and high interest rates? What are your thoughts on the model year '25 bidding process?

Yes, Brandon, this is Jeff. Every year, we kind of go through the same bidding process. We have competition in every one of the product categories. And there is always competition out there. We're obviously working to be kind of best-in-class in all of our product categories, making sure that we're hitting on our automation, our efficiencies, as well as pushing our vendors to pass along the pricing so we can get that to our customers. So we're being aggressive out there where we can be and pushing that. But certainly, we're always dealing with competition. We've got competition in every one of the product lines.

Our next questions come from Alex Perry with Bank of America.

I guess just first, any more color you can give on the sort of expectations for whether it's Sportech or the Powersport segment should contribute for the year. I guess, specifically, any color you can give on sort of the phasing in any seasonality we should be thinking about with the business as we build our models up?

Yes. This is Andy. As we consider seasonality, we anticipate that our current revenue rates will remain stable. For the overall powersports sector, we are projecting approximately $400 million in revenue for the year. We believe our focus will lead to flat market growth along with an increase in organic content as we continue to secure business and enhance our product offerings, particularly by introducing additional solutions.

That's really helpful. And then just my follow-up is on Marine. I think you said 2Q decline similar to 1Q. I guess as we move into the back half, what gives you the confidence that you should start to see an improvement in the Marine business?

Certainly. In the Marine segment, we are observing resilience at the retail level, along with solid customer traffic and strong interest. The marine original equipment manufacturers are excelling in product innovation and are continually enhancing their offerings. We do not see any deficiency in attractive products or current demand in the market, particularly with the upcoming 2025 model year and the new innovations expected to arrive in the latter half of the year. We believe that inventories in the supply chain are well-managed, and the manufacturers have been very proactive in aligning production with dealer needs. There remains considerable demand, particularly for new innovations. Currently, we perceive that the market is stabilizing at a low point. Although there has been softness in certain high-demand components during the first quarter, we anticipate this trend will continue, especially considering the macroeconomic factors through the second quarter. As we evaluate the situation, we deemed it wise to analyze the market in relation to our product mix. However, overall demand persists, and we are witnessing resilience in particular product categories, which reinforces our confidence for stabilization in the latter half of the year.

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

Thank you. I want to end the call, once again, by thanking our amazing team members who have made these past 65 years as a company possible. Their leadership, tenacity, and passion for what we do is evident in the company that we are today. Patrick's ability to adapt, grow and evolve over this time period from a manufactured housing supplier into a more diversified partner to the RV, marine, powersports and housing industries supports our goal of being the supplier of choice to the outdoor enthusiast space. We will continue to be stewards of good business, accelerating the transformation of our company while optimizing our financial and operational health. Thank you very much for your continued support.

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