Earnings Call Transcript - PATK Q4 2021

Operator, Operator

Good morning, ladies and gentlemen, and welcome to Patrick Industries, Fourth Quarter 2021 Earnings Conference Call. My name is Melissa and I will be your operator for today's call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference is being recorded. I'll now turn the call over to Ms. Julie Ann Kotowski from Investor Relations. Ms. Kotowski, you may begin.

Julie Ann Kotowski, Investor Relations

Good morning everyone and welcome to our call this morning. I am joined on the call today by Andy Nemeth, CEO, Jeff Rodino, President, and Jake Petkovich, 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 2020 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.

Andy Nemeth, CEO

Thank you, Julie Ann. Good morning, ladies and gentlemen, and thank you for joining us on the call today. As we crossed the finish line for fiscal 2021 and reflected on the environment we and our customers operated in during the year, we remain energized and enthusiastic about the tremendous performance of our team members and many impressive accomplishments of our organization during an incredibly dynamic year. 2021 was strong for us across a wide platform of operational metrics, where we meaningfully exceeded historical milestones in revenue, gross margin, operating income, operating margin, operating cash flow, dividends, and business acquisitions, among others. We continue to strategically diversify our leisure lifestyle platform with the addition of key new businesses in marine and marine aftermarket, as well as fortifying our portfolio of RV, MH, and industrial offerings. We completed 10 acquisitions during the year representing more than $350 million in annualized revenues. We also amended our credit facility and broadening our liquidity profile with two separate senior unsecured note offerings which enhanced our patient capital structure. And while our family has grown to more than 11,000 team members, we've also leveraged the strength of our culture and talent to grow and profitably. While supply chain challenges impacted all major markets in 2021, our teams worked tirelessly in alignment with our customers' demands based on product availability and other factors to flex our schedules in pace and deliver to our end markets in three key areas. First, our strong liquidity profile and cash generation, along with our multi-brand production capacity and bandwidth, buying power and procurement strength between brands to secure incremental inventory for our customers production. Second, our continued strategic investment in automation and our information systems, which began in the second half of fiscal 2020, allowed us to further position our teams to adapt to the tight labor market conditions. And third, we invested in human capital initiatives that included enhanced employee benefits and wage programs, cultural alignment and connectivity, heartfelt and purpose-aligned employee driven philanthropic programs, and focused leadership training and connectivity. These initiatives allowed us to improve the lives and maximize the talent of our people and apply their unique capabilities and tactical strengths in strategic areas across our footprint. 2021 was also a time for us to foster and grow our ESG initiatives as we worked to reduce energy and material consumption, identify renewable energy sources, and most importantly, invest in our people and communities. Patrick's 11,000 team members are the rock solid and inspiring platform that helped move our markets in a positive, continually evolving, and improving direction. And in 2021, our 'better together' philosophy resonated across our organization, making us a better partner for all our stakeholders. The support of this team, our suppliers, financial partners, and Board of Directors helped make 2021 an incredibly successful and exciting year. And also positioned us to be even stronger and more competitive for our customers and shareholders for 2022 and the years to come. We're extremely grateful and humbled by the collective efforts of our team members, who through their creativity, collaboration, and innovation have consistently delivered solutions supporting our customers, markets, communities, and purpose. From a market perspective, the leisure lifestyle markets represented 75% of our revenues in the quarter. The RV and marine markets continue to be driven by strong outdoor recreation trends, which have increased RV and boating activity, resulting in demand from both new entrants and existing lifestyle participants. Manufacturer backlogs and lean dealer inventories position leisure lifestyle positively in the quarter and into 2022. Our housing and industrial markets replicated the demand strength of leisure lifestyle markets, representing approximately 25% of fourth-quarter revenues. MH OEM backlogs continue to grow, and MH fundamentals drove strong results against the backdrop of robust housing demand and tight conditions. The residential housing and commercial markets were equally strong, bolstered by strong big-box and retail activity. On the backs of a record wholesale unit shipment year in 2021 of more than 600,000 units in our foundational RV market and the corresponding strength in tailwinds in our marine and housing and industrial markets. We also produced record financial results in 2021. Our fourth-quarter revenues of $1.1 billion increased 49% or $375 million. Our net income for the quarter increased 61% to $61 million, and we earned $2.62 per diluted share. Our full-year revenues of $4.1 billion increased 64% or $1.6 billion. Our net income increased 132% to $225 million and we are at $9.63 per diluted share. I'll now turn the call over to Jeff Rodino, who will provide further details into our end markets.

Jeff Rodino, President

Thanks, Andy, and good morning, everyone. Our RV revenues of $674 million in the fourth quarter were up $228 million or 51% and represented 59% of our consolidated sales. RV wholesale unit shipments were up 13%, totaling approximately 147,600 units for the quarter. Retail unit shipments decreased 16% to approximately 86,000 units in the fourth quarter. The decrease in retail unit shipments is attributed to continued limited model availability, as well as being consistent with traditional seasonal winter retail demand trends. Especially in comparison to the Q4 2020 backdrop, where retail fulfillment occurred far later in the year due to COVID-related disruptions earlier in 2020. With the emergence of some winter restocking, RV dealers are well-positioned, yet not back to historical inventory stocking levels to meet strong continued retail demand in the initial selling months in the first half of 2022. Seasonal winter buying patterns, typically lightest in the winter months, coupled with the RV industry's unique and distinct ability to continue to flex production levels beyond what would be expected given the supply chain constraints, have allowed dealers a better opportunity going into 2022 to establish a solid initial base to sell from, compared to an extremely fair level earlier in 2021, which we believe constrained retail sales overall in 2021. Record OEM reported backlogs continue to point to a strong expected 2022 retail season. Our estimates indicate the recalibration of dealer inventories has just started with TTM weeks on hand at the end of December 2021, up 27% to approximately 11 to 12 weeks from December 2020 estimated comparative weeks on hand at approximately 8 to 9 weeks. This level is significantly below our estimates of approximately 26 to 30 weeks, historically carried on average across the industry pre-pandemic. Despite the modest build in dealer inventory, dealer inventories are down 29% when compared to 2019. Our retail sales are up 22% on a TTM basis. Further looking at the durability of RV end markets, we pointed to the demographic shifts, which indicate positive long-term structural changes in the composition of RV owners. According to the RVIA, 72 million Americans plan to go RVing in 2022, and KOA has reported that advanced bookings in 2022 are up 51% over 2021 bookings. Additionally, an estimated 69% of new RV owners are millennials and Gen X, with a growing Gen Z demographic. Millennials currently spend the most on RV purchases with an average purchase of $82,000, and 84% of these participants plan on purchasing a new unit in the next five years. The increasingly diverse composition of RV owners, including growing demographics of single individuals, many of whom are seeking increasingly more remote areas for their camping locations, and the flexibility of the units to support more boondocking, continue to fortify our loyal and growing baseline of lifelong RV enthusiasts. On the acquisition front, while we continue to strategically diversify our market mix, we also continued to invest in our fundamental RV platform with the acquisition of the industry-leading Alpha Systems and its new product capabilities, including highly engineered and proprietary offerings in adhesives, sealants, membranes, and butyl tapes to the RV space, as well as our other end markets. Now turning to the marine industry, which Andy mentioned has been an active part of our strategic diversification strategy in alignment with our belief in the long-term potential of the leisure lifestyle markets. Our marine revenue increased $81 million or 75% in the quarter to $189 million, and represented 16% of our sales, up from 14% in the fourth quarter of 2020. Marine wholesale unit shipments were relatively flat in the fourth quarter of 2021 from 2020 due to capacity limitations as a result of supply chain constraints. On a pro forma run rate basis, we expect our marine revenues to approach nearly $1 billion in annual sales and constitute a meaningful strategic diversification in our end market mix. Retail demand for boats has not fallen off. And while marine retail sales in the quarter decreased approximately 5% primarily due to lack of inventory on dealer lots and the capacity constraints previously mentioned. Our estimates indicate that dealer inventories and weeks on hand have gotten worse when compared to December of 2020. We estimate that the TTM weeks on hand at the end of December 2021 are approximately 12 to 13 weeks down from an estimated 18 to 19 weeks on hand at the end of December 2020 or an estimated decrease of dealer inventories of approximately 35% year-over-year. This represents an even more dramatic decline than our estimates on the RV front. We believe historical marine inventory levels approximate 35 to 40 TTM weeks on hand, on average across the industry. Based on these current estimates on our channel checks, OEM production requirements indicate channel fulfillment production level needs well into 2023 and likely into 2024 to restore dealer inventories to acceptable levels and even estimated new normal levels. Marine market trends are durable, not only from an OEM production vantage point, but around the overall consumer environment for the 100 million Americans who go boating each year. New boating entrants are sticking with boating, and new and existing boaters continue to drive demand not only for new boats but aftermarket parts and accessories. Our marine aftermarket business has grown to over $128 million of annualized revenue. The addition of Wet Sounds, Sea-Dog, SeaDek, Coyote, Tumacs, and Williamsburg in 2021 along with our existing profile of OEM and aftermarket products, extends our capabilities to fulfill the needs of both OEM and marine aftermarket growth. The marine space is driven by new participants across a diverse range of demographics who seek the freedom and versatility of water-based recreation and the amenities of building that foster similar to the RV markets: work and study from home opportunities, pet-friendly accommodations, and the portability of marine lifestyles to satisfy a variety of objectives. Even with the expected production increases in 2022, supply continues to be outpaced by new entrants and existing boat owners who are upgrading or adding to their fleet and grilling boat club consumption of new boat production. Demands for new boats with the latest amenities and features poise OEM production and ideal supply-demand dynamics that we predict will continue until the later stages of 2023. I will now talk a little bit about our housing and industrial side of our business, which Andy has mentioned collectively approximated 25% of our overall revenues for the quarter. Our manufactured housing sales of $151 million represented 13% of our total revenues in the quarter, increasing 24% over the fourth quarter of 2020 on an increase of MH wholesale unit shipments up 7%. MH OEMs are experiencing some of the most attractive market conditions in the last decade, with ASPs increasing in the quarter and during the year across all MH unit types. Despite the very strong production run rate volumes, backlogs continue to break record levels with very few order cancellations. OEMs have responded by investing in new plants and expanding the capacity of existing plants to meet consumer demand. The acceptance of MH as a viable alternative to site-built housing continues to accelerate as those MH relative cost advantage in an environment of rapid inflation, labor constraints, and rising interest. Consumer demand for MH units remains durable and will continue to be a growing factor in accommodating the overall U.S. housing demand as site-built single-family housing grows increasingly out of reach for many families. Growing MH communities, the momentum of urban to suburban migration, and the attractiveness of MH housing in comparison to pricing for site-built homes all point to the long-term outlook for the MH to be a strong driving factor in our profitability and revenue mix going forward. Revenues in the industrial market sector, which is primarily tied to residential housing and home improvement, were $134 million or 12% of our overall sales mix in the fourth quarter, increasing 39% compared to the prior year. Total housing starts for the fourth quarter of 2021 increased 5% with multifamily housing increasing 39% in the quarter. Home-builders continue to experience an increase in backlogs, as well as a decrease in backlog conversion, which means homes are taking longer to build. As a result of the sharp increase in both single and multifamily housing in 2021, further driven by work and study from anywhere demand, many consumers have decided to remodel their existing homes rather than purchase a new home. As a result, our industrial sector greatly benefited from DIY and home improvement activity, and demand from our big box customers was exceptionally strong during the quarter and the year. We see these trends continuing into 2022.

Jake Petkovich, CFO

Thanks, Jeff, and good morning, everyone. Our consolidated net sales for the fourth quarter increased 49% to $1.1 billion driven by increases in our RV, marine, MH, and industrial primary end markets. For the year, net sales increased 64% to $4.1 billion. Revenue from our leisure lifestyle markets, which comprise RV and marine, increased 56%, with RV and marine revenues up 51% and 75% respectively. RV content per unit increased 24% to $4,006 per unit, and marine content per unit increased 76% to $3,632 per unit. Revenues from our housing and industrial markets increased 30% in the quarter with MH revenues up 24% versus the prior year, industrial revenues up 39% compared to the prior year. MH content per unit increased 13% to $5,153 per unit. Gross margin in the fourth quarter was 19.8%, increasing 140 basis points compared to the prior year. Gross margin for the year was 19.6%, increasing 110 basis points from the prior year. The size and scale of our operations applied against our focus leverage of fixed costs while still making investments in our infrastructure to support our strategic growth plans, helped to highlight some of our capabilities to our customers in unlocking capacity, purchasing power, and the scope of our footprint to bring resources to our growing markets. Our operational platform is designed to anticipate and accommodate run rate changes in demand, technically improving the execution of our team's operations and production efficiencies. Our platform is further enhanced by strategic investments in processes and technologies that help translate into more effective production and delivery of our products. Warehouse and delivery expenses decreased 20 basis points for the quarter and 60 basis points for the year as the scale of our operations benefited from an increase in the volume of activity and the associated leveraging of fixed costs. Operating expenses for the quarter were 11.5% of sales compared to 10.4% in 2020. This increase is primarily attributable to an increase in SG&A expenses. These increased costs reflect the incremental impact of higher costs related to our acquisitions, as well as increased incentive compensation to reward our people as a result of our performance. In addition to investments in processes and continuous improvement in our human capital management initiatives. For the full year operating expenses were 11% of sales compared to 11.5% in 2020, beneficially impacted by strong revenue growth relative to our ongoing investments in human capital as we continue to actively manage our cost structure in alignment with our revenues. Operating income of $95 million increased 52% in the fourth quarter, and operating margin of 8.3% increased 30 basis points. For the full year, operating income of $352 million increased 103%, and operating margin of 8.6% increased 160 basis points. Our diluted earnings per share in the fourth quarter was $2.62, up 60% from $1.64 in the prior year, and $9.63 for the year, up 129% from $4.20 in 2020. Our overall effective tax rate was 22% for the fourth quarter of 2021 compared to 26% in the prior year. Overall, effective tax rates for the full-year of 2021 was 23% compared to 26% in 2020. The quarterly and year-over-year decreases both reflect changes in state taxes. We expect our overall effective tax rate for 2022 to be approximately 25%. Looking to cash flows, we generated approximately $105 million of operating cash flows for the fourth quarter 2021, an increase of 121% compared to $47 million in the prior-year quarter. For the year, we generated $252 million of operating cash flows, an increase of 57%. The strong generation of operational cash flow in the quarter and year occurred despite our delivered investment in inventory as we prepared and positioned our operational platform for an expected strong start to fiscal 2022 in all four of our primary end markets. We expect our year-end investment in inventory to translate into strong operating cash flow generation in the first half of 2022, driven by OEM production at leisure lifestyle and housing. In alignment with our strategic investments in automation and capacity expansion initiatives, as well as our disciplined capital allocation strategy, we invested $21 million in capital expenditures for the quarter, and $65 million for the full year, an increase of $33 million over 2020 for the full-year. These investments support our proactive approach to drive scalability both up and down by utilizing more advanced automation, technology, and AI which will support higher value-added capacity for our customers for the long term. Currently, we forecast 2022 capital expenditures to be approximately $90 million in alignment with the strategy. Strategic investments in business acquisitions totaled $210 million for the fourth quarter and $520 million for the year. In the quarter, we acquired Wet Sounds, Inc., designer, fabricator, engineering, and distributor of innovative audio systems and accessories, including amplifiers, tower speakers, sound bars, and subwoofers sold direct to OEMs, consumers, dealers, and retailers, primarily within the marine and power sports markets. In addition, we introduced into our portfolio Williamsburg, a manufacturer of seating for the RV and marine end markets, sold primarily to OEMs in these markets. Both acquisitions represent a continuation of our strategic expansion of our marine and RV product portfolios and customer marine OEM and aftermarket solutions. In December, we opportunistically completed the offering of $259 million of 1.75% convertible senior notes to continue to position our capital structure with dry powder and flexibility. These notes will mature in December 2028 and we structured the notes to require us to pay cash for the par value of the notes and not issue shares, which will therefore not be dilutive to earnings as a result. In the fourth quarter, in accordance with our dividend policy, we've returned $8 million to shareholders in the form of quarterly dividends, an annualized increase of 18%, and we further deployed $17 million in the form of share repurchases. Dividends for the year totaled $27 million and share repurchases for the year totaled $49 million, or a total of 612,325 shares repurchased. In January of 2022, our Board of Directors approved our increased share repurchase authorization to $100 million. We expect to continue to tactically target share repurchase in 2022 based on market conditions and valuations that we believe reflect attractive returns to our shareholders and our investments. At the end of the fourth quarter, we had approximately $532 million of total liquidity comprised of $123 million of cash on hand, unused capacity on our revolving credit facility of $409 million, and a total net leverage ratio of 2.3 times. This leveraging liquidity profile positions us to be very flexible and to operate our business under a variety of strategic scenarios. And most importantly, our debt maturity schedule represents patient capital with the vast majority of our debt maturing in the 2027 to 2029 timeframe. As we head into 2022, we currently expect 2022 RV wholesale shipments to remain flat around 600,000 unit shipment level, and we expect retail shipments to be down mid-single digits. Based on these estimates, we expect the resulting build of dealer inventory to support a new normal baseline level of inventory that is expected to be discounted for pre-pandemic levels. In our marine market, we expect marine wholesale shipments to be up low double digits, and marine retail to be flat to up low mid-single digits. Resulting inventory implications point towards lean dealer inventories throughout 2022 with restocking to appropriate levels not occurring until 2023 or even 2024. On the housing and industrial side of the business, we expect MH wholesale shipments to be up mid-single to high single digits for 2022, with retail sales absorbing available wholesale production on a real-time basis. In our industrial end market, we expect 2022 new housing starts to also grow in mid to high single digits. That completes my remarks, and I would like to turn it back to Andy.

Andy Nemeth, CEO

As discussed, we exceeded many positive milestones in 2021 alongside our customers, suppliers, and strategic partners. Our continued strategic diversification is producing results and we are continuing to expand our portfolio of highly engineered products to support our innovation initiatives for our customers in a more versatile end-market composition. We expect to continue to expand our presence in both OEM and aftermarket product offerings in addition to our focus on innovation and new product development. Visibility for 2022 remains clear and positive. We expect RV to be in a healthier inventory position to not only satisfy strong consumer demand, but to provide a better overall consumer experience, which we are proud to be a part of with our product offerings. Marine production will continue to be driven by strong consumer demand in backlogs, and meaningful dealer inventories are not expected to build until 2023 or 2024. MH, residential housing, big box, and our other industrial markets are expected to exhibit steady growth in 2022 and beyond, and fulfill critical fundamental housing and repair and remodel needs. Our liquidity and capital resources remain strong with available dry powder, our acquisition pipeline is full, and our capital allocation philosophy remains consistently disciplined and thoughtful, providing us with both the foundation and vision for growth, profitability, and innovation. Our culture is strong and getting stronger, and our investments in human capital and related initiatives to improve the lives of our team members and communities will continue to be a focus in alignment with our core values. ESG continues to be a priority for us as we further drive our efforts around the continuous pursuit of a balanced and thoughtful value proposition that betters our environment, people, community, stakeholders, and shareholders. We expect to publish our first corporate sustainability report this year, and will continue to humbly strive for excellence and servant leadership under our better together philosophy. And finally, we want to thank our customers, team members, Board of Directors, suppliers, business partners, and shareholders for your support as we drive our organization towards the goal of continuously increasing overall long-term shareholder value. This is the end of our prepared remarks. We are now ready to take questions.

Operator, Operator

Thank you. At this time, we'll be conducting a question-and-answer session. Our first question comes from the line of Scott Stember with CL King and Associates. Please proceed with your question.

Scott Stember, Analyst

Good morning, guys, and thanks for taking my questions.

Jeff Rodino, President

Good morning, Scott.

Scott Stember, Analyst

Jeff, you were talking about, I guess where dealer inventories are right now on the RV side, based on weeks on hand, and pre-COVID, we're not even remotely close to that, but we're just trying to get a sense. Can you guys come up with what you think the new normal would be at some point? Whether we get back to those 20-30 weeks on hand, or maybe somewhere in between where we are now and that?

Jeff Rodino, President

Yeah, that very question. We've looked at that and we believe that just talking to our checks, that 18 to 22 weeks range, about 30% less than where we were prior to the pandemic, is where we're going to land. So we still have some pretty good runway to get there and give them to that position.

Scott Stember, Analyst

Got it. Okay. And on the margin side, great job, obviously, with all the automation projects you guys have in place. Price increases and so forth. But, what is the narrative that we should be looking out for operating margin expansion for 2022? Are we still in that 30 to 50 basis point range, or do you foresee any upside to that?

Jake Petkovich, CFO

Jake, thanks for the question. Throughout the year, we've performed well in expanding our operating margin, showing a 160 basis point increase compared to the end of fiscal year 2020. As the year went on, we continued to see quarter-to-quarter improvements. Looking ahead to 2022, we are still targeting a 30 to 50 basis point expansion, which we feel optimistic about. However, we also believe there is potential for greater increases as we monitor real volume outcomes and the ongoing adoption and implementation of automation, which is significantly influencing our efficiency and adaptability in our operations.

Scott Stember, Analyst

And then last question before I jump back in the queue, the aftermarket seems to be getting to be a bigger and bigger piece of the business for you. I know the Wet Sound acquisition certainly helps. Can you maybe talk about how big overall aftermarket is right now and where that's heading, and a timeline, how big it could be?

Andy Nemeth, CEO

Scott, this is Andy. Without question, we're excited about the aftermarket. I think there's a ton of opportunity in particular. We've had it in our marine businesses as we've gone forward here. We're close to probably $150 million to $160 million all-in on aftermarket today. And we expect to meaningfully expand that as we go forward with opportunities, not only within the marine business but within our RV businesses as well. A lot of opportunity there and we're pretty excited about it. We're excited about the runway that's there and looking to build on that. And along with our OEM mentality.

Scott Stember, Analyst

Got it. Thanks again.

Operator, Operator

Thank you. Our next question comes from the line of Daniel Moore with CJS Securities, please proceed with your question.

Daniel Moore, Analyst

Thank you. Good morning, thanks for taking questions. Your RV content growth up 24% in Q4; can you just talk about how much of that was acquisitions, what it looks like organically and of the organic piece, how much was volume and how much was undiscernible?

Jake Petkovich, CFO

Sure, Dan, it's Jake. In the fourth quarter, we saw some contributions from our 2021 acquisitions, particularly the Alpha Systems acquisition made in April, among others. Looking at the overall contribution for the fourth quarter, we achieved 49.4% on total revenue. For the enterprise sector, which has been more focused on the marine market this year, we experienced a 12% increase from acquisitions, with industry growth at about 10% and pricing up by 18%. Notably, our organic growth is around 9% to 10% after accounting for other factors, highlighting our ability to leverage our scale and relationships to succeed while others may face challenges. This trend has allowed us to gain market share, a momentum that has continued throughout the fiscal year 2021 and is clearly evident in the fourth quarter. For the full year, our results are spread out a bit differently. We saw a 64% increase year-over-year, with 14% coming from acquisitions, industry growth at 27%, and pricing contributing 16%. Our organic growth is in the 7% range, which remains strong and exceeds the 3% to 5% range we've consistently mentioned before. This strength is reflected in both our overall revenue and our content, which has shown significant growth on a quarter-over-quarter and year-over-year basis, calculated on a trailing twelve months basis.

Daniel Moore, Analyst

That's very helpful, Jake. That addresses three questions, even though I only asked one. Can you discuss pricing? As we progressed through the quarter and into January, are you still implementing price increases, and what uplift should we anticipate in Q1 of 2022 from the pricing initiatives we've implemented, either in dollar amounts or percentage terms?

Jeff Rodino, President

This is Jeff. We continue to adjust our pricing in the market as we progress through the fourth quarter, and some of that trend is carrying into 2022, although not at the same levels we experienced in the third and fourth quarters of 2021. As a result, we are seeing pricing at about half the percentage of those earlier quarters as we enter this year. Additionally, we are observing some stabilization in several areas, but there remains some volatility with certain commodities. For instance, we've noticed fluctuations in lumber and aluminum prices, with some decreases followed by increases. We're monitoring these changes closely and will adjust accordingly.

Andy Nemeth, CEO

As we've looked out, Dan this is Andy, we're looking at commodities. There'll be some puts and takes I think certainly as the supply chain eases up, which is our expectation. As we move throughout this year into Q2 and Q3, we're expecting some of that to happen which is a good thing from our perspective. And so I think while there may be some pricing going out right now, we're anticipating as well in the back half that we might see some pricing come back, which is a good thing again, on the inflationary side. So we're looking forward to that model but our expectation is puts and takes flat for the year on pricing plus and minus.

Daniel Moore, Analyst

Maybe one more. You mentioned incremental strength we're seeing in the MH side of the business. Are there organic or inorganic opportunities to expand share? Hasn't been a big focus of M&A up until this point, wondering if that might shift given the longer-term supply-demand outlook. Thanks again.

Jeff Rodino, President

Yes, thanks. We think in the MH market there's plenty of upside for us. Just organically throughout our organization, we've really put a lot of our groups together to work towards a more consolidated look at the MH market and cross-sell some of our brands and some of our products. We've been able to do that this year. We've seen some tremendous growth, as you can see by the numbers we put out today as far as versus wholesale shipments. And we've got some opportunities with new players on the supply side and our distribution channels which will give us a lot of upside opportunity in 2022, I believe, and beyond. A lot going on there.

Andy Nemeth, CEO

I think there's some M&A opportunity, Dan, I think what we get excited about on the MH side is that business for us is highly leverageable. And so as they continue to gain capacity with the strengths of the backlogs that are there, our business organically is leverageable and from a fixed cost perspective as well. We look forward to the upside on MH, whether it's organic or M&A. If there's opportunities either way for us, we're going to look at both of them.

Daniel Moore, Analyst

All right. I'll jump back with any follow-ups. Thanks.

Operator, Operator

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

Craig Kennison, Analyst

Hey, good morning. Thank you for taking my questions as well. Really, a big picture question here, but there's a wide gap between your results today and the outlook for this industry, and then the seven times earnings multiple or less that you trade at. What's your explanation for what the market may be missing here?

Andy Nemeth, CEO

Craig, this is Andy. Thanks for that question. We question that ourselves as we look at our results and where we performed. I think from a business model perspective, we feel really good about the platform and leverage ability of the platform. We're brand fronted. We go to market through our brands. And so I think there's probably some confusion there as to how leverageable that profile really is. But overall with our better together philosophy, we've got tremendous connectivity and collaboration. And we can leverage capacities between brands as we go to market with different product offerings and product opportunities. And so we look for a good, better, best type of product offering for our customers and believe that that's a great focus for us. I think as we look at the model, our aftermarket business is growing, we've got a lot of leverageability on the platform, as well as our fixed costs structure, so we need to do a good job of telling the story about the company. I think that, from our perspective, we think it's a great story to the market. We're working on that is what I had to say. But overall, I think from a communication perspective, there are a lot of great things. Our team members really worked well together. We've got a humble philosophy here. And so for us, we want our results to speak for themselves. And so, we're going to do some bridging of that messaging. Overall, we love the brand platform. It's been phenomenally successful for us. Our team members are well-connected. We leverage synergies across the platform, and it's not as visible under the brand fronted model. But overall, we get excited about the connectivity that's there, and we leverage that every day through our team members. We've got phenomenal teams and phenomenal leaders across that brand spectrum, and they've done a great job of driving results, and we want to continue to tell that story in the right way.

Craig Kennison, Analyst

Thank you. And then, of course, the balance sheet looks very well prepared for M&A if you want to pursue that. But your stock's super cheap as well. How does the Board weigh share repurchase versus M&A? And are the deals that you're looking at as affordable as your own stock?

Jake Petkovich, CFO

As you assess our current trading price of just over six times, we are exploring deals in the range of six to eight times. In terms of valuation, we purchased over 600,000 shares in 2021 at an average price of around $80, and another 166,000 shares in January at just under $70. With our strong cash flows, we have numerous options for capital allocation to invest in the business and enhance returns. We are actively pursuing these options, having recently authorized $100 million for stock buybacks, reflecting our commitment to creating value for shareholders. Our acquisition pipeline is also robust, and while we aim to boost our share price valuation, we see plenty of opportunities to invest in the business and allocate capital wisely. We will continue to focus on driving those returns.

Craig Kennison, Analyst

Thanks. I guess lastly, I'm very familiar with boondoggles but I'm less familiar with boondocking. Could you just explain what that trend is all about?

Jeff Rodino, President

Yeah, it's given people the opportunity to go anywhere with their RVs without needing to connect to short power. They can turn on the generator or use battery power, allowing them to live off the grid. There are many opportunities out there, such as wineries across the country that now allow visitors to stay overnight on their properties. This has opened up a wide range of new experiences for RV enthusiasts to explore the country. It’s exciting to see the advancements in solar technology and other innovations that RV manufacturers are implementing, providing users with even more opportunities to travel throughout the country.

Craig Kennison, Analyst

Awesome. Thank you so much.

Andy Nemeth, CEO

Thanks, Craig.

Operator, Operator

Thank you. We'll pause a moment. Thank you. It seems that we've come to the end of our question session. I'll turn the floor back to Ms. Julie Ann Kotowski for final remarks.

Julie Ann Kotowski, Investor Relations

Thanks, Melissa. We appreciate everyone for being on the call today and looking forward to talking to you again at our first-quarter 2022 conference call. A replay of today's call will be archived on Patrick's website. I'll turn the call back over to our Operator.

Operator, Operator

Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.