When Elkhart, Ind.-based competitors Drew Industries Inc. and Patrick Industries Inc., both major suppliers to RV manufacturers, discussed their quarterly results with investors, a lot of similar themes emerged.
Jason Lippert, CEO of Drew Industries, voiced optimism for the RV industry during his earnings conference call with investors Aug. 4. “As we look forward to the coming quarters we see many green lights, one of them being solid double-digit growth in retail RV sales for the first five months of the year,” Lippert said. “The growth is a key indicator that the RV lifestyle is continuing to gain in popularity. We believe dealers will come prepared to purchase units at the Open House in Elkhart in September.”
Todd Cleveland, president and CEO of Patrick Industries, was similarly optimistic during Patrick’s earnings call Aug. 1.
“We believe overall OEM and dealer sentiment in the RV industry remains positive, consistent with a strong retail-selling season. We remain bullish on the industry as a whole as we head in to the model change for the 2016 year,” he said. “The current mix-shift in the industry to the larger concentration of entry-level less expensive units — while nominally impacting our content-per-unit growth — is a positive indicator to longer-term industry growth as younger consumers are entering and broadening the market.”
He added, “As it relates to the correlation between retail inventories and overall production levels, industry reports and dealer surveys continue to indicate RV dealer inventory levels are in line with retail demand, with strong retail traffic on the dealers’ lots the first half of the year,” Cleveland said.
Looking at the trends in the industry, Lippert noted, “RVs are becoming incredibly functional with more upgrades than ever seen before in the RV industry, many of which we’ve had a hand in developing and supplying to the clientele market. In the last few years the RV industry developed more entry-level products specifically targeting families in both towables and motorhomes. We feel strongly that the RV lifestyle which embodies outdoors, family and community will continue to attract more potential buyers to the market.”
He pointed out that today there are “a lot more RVs getting to the marketplace hitting price points that are lower, so a lot of younger people and younger families can look at RVs that might have looked away or not looked at the segment years ago, because the entry prices were too high. But because there are so many entry points today, it’s bringing more people to the market and we are seeing a shift toward smaller vehicles on towable side.
Cleveland said that in the view of Patrick’s management team, “We continue to believe the future looks promising for the RV industry based on a number of factors, including positive industry demographic trends with younger buyers and an increasing number of Baby Boomers reaching retirement age, readily available financing, new innovative products coming to the market and improving strength in the overall economic environment, not to mention the value of the RV lifestyle related to spending to quality time with families.”
Both companies are growing sales as the RV industry grows, but they’re also expanding through acquisitions. Both CEOs signaled plans for more.
Lippert said, “Analysts and investors ask about the outlook for acquisitions and what we’ll say today is that the pipeline remains full,” adding that over the last two years, Lippert has made several acquisitions outside the company’s core RV business.
“Expanding our prospects to other markets and industries opens up a significant amount of additional possibilities so we can look to acquire great businesses,” he continued. “Acquisitions have been key in our decade-long strategy to become a great supplier in the RV space and we believe acquisitions will provide us the same benefits in adjacent markets as we look to become a great supplier in those businesses; mainly marine, heavy truck, equestrian cargo trailer and the bus market.”
Patrick, too, is keeping an eye out for acquisitions, as Cleveland noted, “On the acquisition front, the pipeline is full and we continue to explore both smaller and larger acquisition candidates in the RV and industrial space. As we previously announced, we completed the second acquisition of 2015 by acquiring Structural Composites of Indiana or SCI, an $18 million fiberglass manufacturer of custom-molded, high-quality large front and rear caps and roofs for OEMs in the RV marine, transit and other industrial markets.” The buyout followed Patrick’s acquisition of Better Way in February.
“Our primary focus in the acquisition arena is still in the RV and industrial markets based on our current valuations and our ability to quickly capitalize on our core competencies,” Cleveland said. “The pipeline continues to have a broad scale of candidates with annualized revenues ranging from $15 million up to $200 million in size.”