Andy Nemeth: Hey, Dan. Andy Nemeth. I think as we look at content today, we feel like we have bottomed in general. There may be a few small puts and takes here. But overall, we feel like we bottomed and we would expect content to continue to go up. kind of sequentially as we look at the model going forward, especially with the business that we’ve brought on. I think one of the other things that we’re really excited about is when you think about market conditions like this, and the consumers — or I’m sorry, the customers at the OEM level, there’s a higher concentration on new innovations and product development, and we’re actively and aggressively pursuing a lot of different innovations out there in the product space today. So when we look at content and where we sit today, kind of bouncing along the bottom with some uptick with business that we brought on, we get pretty excited about where we think we can go once the market doesn’t flag, especially with a lot of the new product solutions that we’re bringing to market and working with our customers on, not only current model year out but two, three year models out, as we’ve mentioned.
So our expectation is the — long answer to your question, but we expect content to sequentially continue to go up. We do believe it’s bottomed.
Daniel Moore: Very helpful. And on Sportech and Powersports, more generally. You’ve had Sportech under the umbrella for a couple of months now. Just how would you characterize the opportunities to drive content over the next few years relative to your initial expectations. You described some of those cross-selling or internal sales and initiatives that or meetings that you’ve already had taken place, but just talk about the — where you see that opportunity going?
Andy Nemeth: 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.
Daniel Moore: 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? Thanks again.
Andy Nemeth: Yes, sure. So I think as we look at capital allocation, we’re going to stay focused on making sure that we’re reinvesting in the business. We’re going to continue to pursue automation initiatives that increase throughput and quality. That’s been very successful from our perspective. So we’re going to continue to deploy capital there. We’re going to remain opportunistic on the buyback side of the business. And we’ve always got a grid in place as it relates to marker that we will execute upon based on the return model that we’ve put forth. So we’re always actively looking at that, whether or not we execute in a given quarter, we do — we are very actively monitoring the buyback. And then on the acquisition front, for sure, we’re excited about the pipeline that exists out there today.
We’ve got the liquidity. We’ve got the capital structure to be able to support a continued acquisition profile, especially as we look at our leverage profile as well, which we’ve been able to deliver upon in bringing that down immediately following Sportech and expect to continue to do so. So I think we remain opportunistic and as we’ve mentioned on offense as it relates to acquisitions and want to continue to actively pursue them.
Daniel Moore: Great. Thank you again.
Andy Nemeth: Thank you.
Operator: Thank you. Our next questions come from the line of Brandon Rolle with D.A. Davidson. Please proceed with your questions.
Brandon Rolle: Thank you. Thanks for taking my questions. 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.
Andy Nemeth: 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 gain 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.
Brandon Rolle: Okay. Great. And then just one other question. I think currently, over the past couple of months, the model year ’25 bidding process within the RV industry has been going on. Could you comment on the state of competition, any increased competition or any potential — it seems like OEMs are looking to get prices lower, given affordability issues within the industry and elevated interest rates. Any commentary on the model year ’25 bidding process? Thank you.
Jeffrey Rodino: 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.
Brandon Rolle: Great. Thank you.
Operator: Thank you. [Operator Instructions]. Our next questions come from the line of Alex Perry with Bank of America. Please proceed with your questions.
Alex Perry: Hi, thanks for taking my questions here. 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? Thanks.
Andy Nemeth: Yes. This is Andy. I think as we look at kind of seasonality, we expect kind of existing run rates or current run rates that we’re seeing today. As we look at kind of overall Powersports for Patrick as a whole for the year, we’re estimating around $400 million of Powersports revenue in that space today. So again, we feel like where we’re geared, where we’re focused, kind of flat market growth or organic — let’s call it, flat market growth with up organic content as we continue to pick up business, but also gain content on products, especially as it relates to additional solutions that were bringing to the table.
Alex Perry: 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? Thanks.
Andy Nemeth: Sure. I think as we’re looking at Marine, there is resilience at the retail level, and we do see solid traffic out there. There’s a lot of interest. The marine OEMs do a fabulous job of innovating product and continuing to push the envelope as it relates to innovations in the space. So we don’t believe that there is a lack of attractiveness of product out there and nor do we believe that there’s a lack of demand. Right now, as we just kind of look at where the market’s at, the anticipation of the ’25 model year and the new innovations that do come out in marine kind of hitting in the back half we feel — and we also feel like inventories in the channel are in balance. We think the OEs have been extremely aggressive in managing production in alignment with the dealers.
And so there’s a lot of discipline. There’s still tremendous demand out there, especially for the new innovations, and we just kind of look at that model today and think that we’re kind of bouncing along here on the bottom. It’s been soft in the higher concentrated components, to date, through Q1, and we just expect that to continue, especially with what we’re seeing from a macroeconomic perspective through Q2. So as we look at things, again, we wanted to — we thought it was prudent to kind of make sure that we’re looking at the market according to our mix. But overall, again, the demand is still out there, and we’re seeing that resilience with certain product categories in the space. And again, that’s what gives us confidence towards the back half that we’ll see some stabilization.
Alex Perry: Perfect. That’s really helpful. Best of luck going forward.
Andy Nemeth: Thank you.
Operator: Thank you. Ladies and gentlemen, I will turn it back over to Andy Nemeth for closing remarks.
