PATK Q3 2025: Content Per Unit Up 9% in RV, Signaling Platform Leverage
Patrick Industries’ Q3 results highlight a strategic pivot toward platform content expansion, with RV content per unit up 9% and marine up 10% year over year, despite modest end-market shipment declines. Management is executing on an integrated solutions model, leveraging acquisitions, composites, and aftermarket to drive share and margin opportunity as inventories remain historically lean. Margin compression in the quarter is positioned as transitory, with 2026 guidance calling for a 70 to 90 basis point rebound, underpinned by volume leverage and operational automation.
Summary
- Content Expansion Drives Share Gains: RV and marine content per unit growth outpaces industry shipment declines, reinforcing platform strategy.
- Aftermarket and Digital Investments Accelerate: RecPro integration and AI-driven efficiency initiatives underpin future margin expansion.
- 2026 Margin Rebound Anchored in Platform Leverage: Management guides to 70–90bps margin improvement via sales, automation, and content mix.
Performance Analysis
Patrick Industries delivered 6% revenue growth in Q3 2025, with organic gains offsetting a 2% decline in overall industry shipments across its core end markets. The RV segment, accounting for 44% of consolidated revenue, saw a 7% top-line lift, while marine and power sports posted 11% and 12% growth, respectively. Housing, representing 31% of sales, was up 1%—a modest result given ongoing softness in manufactured housing shipments.
Key to the quarter was content per unit (CPU) expansion: RV CPU rose 9% year over year and 8% sequentially, while marine CPU climbed 10% year over year and 15% sequentially. These gains were driven by new product innovation, acquisitions (notably in composites and marine accessories), and cross-segment integration. Despite this, gross margin contracted by 50 basis points to 22.6%, and operating margin fell to 6.8%, reflecting short-term inefficiencies from model year changeovers and heavier OpEx from the RecPro aftermarket acquisition. Cash from operations and free cash flow remain robust, with $779 million in net liquidity and no major debt maturities until 2028.
- RV and Marine Inventory Remains Lean: Dealer weeks on hand are well below pre-pandemic averages, setting up for a potential restock tailwind.
- Aftermarket Integration Yields New Growth: RecPro direct-to-consumer platform is scaling rapidly, with 400–500 new SKUs cross-pollinated from other divisions.
- Short-Term Margin Pressure: Operating margin compressed on model year transition costs and integration inefficiencies, but management frames this as temporary.
Overall, the quarter showcased Patrick’s ability to drive organic and acquired content growth even as broader industry volumes remain subdued, positioning the company for above-market recovery as inventory restocking and retail demand inflect.
Executive Commentary
"We delivered solid third quarter performance, demonstrating the resilience of our business in a dynamic and unique environment. Our results reflect both the strength of our diversified business model, solid organic growth as a result of our team's innovation and advanced product efforts, and their incredible execution as we continue to navigate dynamic demand levels across our end markets and challenges facing the broader economy."
Andy Nemeth, CEO
"Our total revenue growth of 6% was comprised of 4% acquisition growth, 4% organic growth, and negative 2% industry. Gross margin was 22.6% versus 23.1% in the third quarter of last year. The decline reflected items including short-term inefficiencies related to the model year changeover."
Andy Rader, CFO
Strategic Positioning
1. Integrated Platform and Content Expansion
Patrick’s “full solutions” model—integrating new technologies, composites, and advanced electronics into OEM platforms— is driving above-market content per unit growth, particularly in RV and marine. The company’s Alpha Composites brand, now unified, is positioned to capture a $1 billion addressable market, primarily in RV roofing, flooring, and slide-outs, with incremental opportunity in marine and power sports as adoption ramps.
2. Aftermarket and Digital Transformation
The RecPro direct-to-consumer platform is being scaled aggressively, with hundreds of new SKUs from other divisions and a formalized strategy spanning direct-to-consumer, dealer, and third-party distribution. Investments in digital tools, data analytics, and AI-powered solutions are expected to drive cost efficiency, accelerate decision-making, and unlock new value for customers, supporting margin expansion as volume returns.
3. Strategic M&A and Portfolio Modernization
Acquisitions in marine (Lilypad Marine, Medallion Instrumentation Systems, Elkar Composites) and continued investment in process modernization are broadening the portfolio, deepening OEM partnerships, and expanding cross-segment capabilities. The M&A pipeline is described as active, with increased deal flow from both internal sourcing and external channels, enabling further inorganic growth in targeted categories.
4. Inventory Dynamics and Channel Discipline
Dealer inventory weeks on hand in both RV (14–16 weeks) and marine (16–18 weeks) remain well below historical averages, suggesting potential for a restock-driven volume uptick as retail demand stabilizes. Management expects the “new normal” for inventory to be above current levels but below pre-pandemic norms, creating a medium-term tailwind as channels rebalance.
5. Margin Leverage and Automation
2026 guidance calls for 70–90bps operating margin expansion, driven by volume leverage, content gains, and operational automation. Management highlights ongoing investment in automation and AI, with incremental cost savings (“nickels and dimes”) accumulating across facilities. The company’s lean fixed cost structure is expected to support significant incremental volume without a proportional rise in overhead.
Key Considerations
This quarter’s results reinforce Patrick’s shift from a cyclical volume-dependent supplier to a diversified platform business, with multiple levers for growth and margin improvement as end-market demand recovers.
Key Considerations:
- Platform Content Drives Resilience: Outperformance in content per unit offsets end-market shipment declines, validating the integrated solutions approach.
- Aftermarket Channel Unlocks New TAM: RecPro and aftermarket strategy create a direct channel to end customers, reducing reliance on OEM cycles.
- Composites as a Growth Vector: Alpha Composites targets a $1 billion TAM, with RV as the initial focus and marine as a follow-on opportunity.
- Margin Recovery Linked to Automation and Volume: Management expects automation and sales leverage to drive margin rebound as inefficiencies abate.
- Inventory Restock as Near-Term Catalyst: Lean dealer inventories create potential for a volume inflection, especially heading into the 2026 selling season.
Risks
Risks center on the pace of retail demand recovery, potential for continued margin volatility during integration and model year transitions, and exposure to tariffs and supply chain disruptions. Management is actively mitigating tariff impact through pricing strategies, but any sustained end-market weakness or delayed restock could pressure margins and cash flow. Additionally, the success of the RecPro aftermarket initiative depends on scaling without channel conflict or operational complexity.
Forward Outlook
For Q4 2025, Patrick Industries expects:
- RV retail unit shipments down low single digits; wholesale shipments 335,000–345,000 units
- Marine and power sports shipments down high single digits, with Patrick’s content per unit offsetting industry declines
For full-year 2025, management maintained guidance:
- Adjusted operating margin ~7%
- Operating cash flow $330–$350 million; CapEx $75–$85 million; Free cash flow at least $245 million
2026 initial guidance signals:
- Low to mid single-digit growth in RV and marine wholesale shipments
- 70–90bps operating margin improvement, anchored in volume, content, and automation
Takeaways
Patrick Industries is leveraging its diversified platform and content expansion strategy to outperform industry shipment trends, setting up for margin and volume recovery as inventories normalize and digital initiatives scale.
- Content Per Unit Expansion: 9% RV and 10% marine CPU growth highlights the company’s ability to drive share even in soft markets.
- Aftermarket and Automation as Margin Levers: RecPro and AI-driven process improvements are positioned as key drivers of 2026 margin rebound.
- Inventory Restock and M&A Pipeline: Lean channel inventories and an active M&A pipeline provide optionality for upside as end-market demand returns.
Conclusion
Patrick Industries’ Q3 2025 results underscore a successful shift to a platform-driven, content-rich business model, with strong execution in aftermarket, composites, and digital efficiency. While near-term margin pressure is evident, the setup for 2026 is positive, with multiple levers for growth and profitability as channel inventories and retail demand recover.
Industry Read-Through
The quarter’s results signal a broader industry pivot toward platform content expansion and aftermarket channel development, especially in cyclical sectors like RV, marine, and power sports. Competitors unable to drive content gains or diversify into aftermarket and digital solutions risk margin compression and share loss as OEM production remains disciplined and inventories stay lean. The focus on composites and integrated solutions is likely to accelerate across adjacent industries, with digital and AI-enabled efficiency investments emerging as a key differentiator for margin resilience.