Q1 2023 Marine Products Corporation Earnings Call

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Good morning, and thank you for joining us for Marine products Corporation's first quarter 2023 financial earnings Conference call.

Today's call will be hosted by Dan Palmer, President and CEO and Mike Smith, Chief Financial Officer also hosting is Jim Landers, Vice President of corporate services.

At this time all participants are in listen only mode. Following the presentation. We will conduct a question and answer session and instructions will be provided at that time for you to queue up for questions.

I would like to advise everyone that this conference call is being recorded.

Jim will get us started by reading the forward looking disclaimer.

Yes.

Thank you Andre and good morning.

Before we get started today I'd like to remind everyone that some of the statements. We will make on this call may be forward looking in nature.

A number of known and unknown risks I'd like to refer you to our press release issued today for 2022 Form 10-K, and other SEC filings that outline those risks all of which are available on our website.

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If you've not received our press release, please visit our website.

Today's earnings release and conference call, we refer to EBITDA, which is a non-GAAP measure of operating.

We use this non-GAAP measure because it allows us to compare.

Eric performance consistently over various periods without regard to changes in our capital structure. We're also required to use EBITDA report compliance with financial.

Under our credit facility.

Our press release issued this morning on our website contain a reconciliation of this non-GAAP financial measures.

The nearest GAAP financial measure. Please review the disclosure if you're interested in seeing how it's calculated.

A few comments about this quarter and then be available for your questions I will now turn the call over to our President and CEO Ben Palmer.

Thanks, Jim and thank you all for joining our call. This morning.

I'll begin with a few highlights regarding our first quarter 2023 earnings press release.

Yeah.

Great products Corporation was once again generated record net sales for the first quarter as we experienced improvement in our supply chain issues and transportation availability relative to the prior year period.

We were able to complete a larger number of substantially completed boats in our inventory.

Sure.

Average selling prices increased primarily due to a favorable model mix at both chaparral.

In addition, the increased unit shipments during the quarter allowed our dealers to begin building inventory to prepare for the upcoming 2023 spring retail selling season.

Dealer inventories are trending towards more normalized levels.

Over inventory remains below pre pandemic levels.

We also announced this morning that our board of directors declared a regular quarterly cash dividend of 14 <unk> per share.

With that overview I'll now turn the call over to Mark Smith, our CFO .

Thanks, Dan.

I'll begin with an overview of the company's first quarter 2023 financial results.

Net sales for the first quarter of 2023 were a record $189 million at 55% increase.

First quarter of last year.

Unit sales increased by 40%.

The average selling price.

Increased by 12%.

As Ben mentioned these increases were driven by our ability to complete and ship a favorable mix.

This satisfies both dealer and retail demand.

We continue to see significant improvements in our supply chain.

Gross profit in the first quarter of 2003 was $29 million.

The 8% increase in the first quarter of last year.

Gross margin for the first quarter of 'twenty three was 24, 4% a slight improvement over the 24 zero percent in the first quarter of 'twenty two as we saw some benefit from manufacturing efficiencies.

Selling general and administrative expenses for the first quarter of 'twenty three for $14 $5 billion in it.

Increase of 57% compared to $9 2 million in the first quarter of last year.

This increase is due to the call.

So typically increase with higher sales and profitability.

Incentive compensation.

Those conditions.

R&D expenses.

These first quarter of 2023 expenses also included a noncash pension settlement charge of $2 1 million.

Selling general and administrative expenses were 12%.

In the first quarter of both years.

10% of net sales in the first quarter of this year, excluding that non cash pension settlement charge.

As we complete the final termination of our pension plan, which is expected in the second quarter, we do not expect to make any cash contributions in connection with the transfer.

Liabilities to a third party.

Because of the plans fully funded status.

EBITDA in the first quarter of 2023 was $15 million.

Increase of $5 4 million or 56% compared to the first quarter of last year.

We recorded we reported a record quarterly net income.

$11 $5 million in the first quarter of this year, 64% increase compared to $7 1 million the same quarter of last year.

Diluted earnings per share.

34.

In the first.

Quarter of this year compared to 21.

The first quarter of last year.

Our international sales, which account for approximately 70% of our total sales decreased by 89%.

Last year.

Our cash balance at the end of the first quarter of 'twenty three was $62 6 million.

A $19 4 million increase compared to the cash balance at the end of last year.

This strong cash balance as a result of improvements in our logistical processes and availability of materials and components, which allow us to ship more of those than we produced during the quarter.

Dealer inventories are increasing towards more normalized levels, but continued to be lower than pre pandemic levels.

Moderately higher inventories will benefit our dealers as we enter into the height of the retail selling season.

The outcome of the winter boat shows was generally favorable in our view is continue to request those.

We've already sold to retail customers as well as additional inventory for the upcoming selling season.

Having said that we continue to monitor macro indicators, such as consumer confidence slowing economic activity and the increasing interest rates all of which could weakened demand for recreational boats.

Now I'll turn it back over to Dan for a few closing remarks, thanks, Mike.

Our market share remains strong chaparral stern drive market share remains number two in that size category the.

The combination of chaparral and robalo outboard sell the third highest market share in their size category.

Our successive quarters of record sales as a result of the hard work of chaparral and Robalo management team and our other dedicated employees.

Well as our strong dealer network as well as the appeal of the quality and design of our products.

Thank you for joining us this morning.

Since you asked.

Thank you Sir at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.

Yes.

We'll go first to Craig Kennison Baird.

Okay.

Okay.

Thanks, and good morning, everybody.

Sure.

And congratulations on the progress on your on your attention as well my.

My question was on the.

The availability of credit I'm wondering if there's been any change in credit availability in the wake of the recent bank collapses.

Greg This is Ben.

We certainly.

The credit line to providers.

The dealers.

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I would describe as they've not been proactive.

Increasing the lines, but we've been successful and are coordinating with.

The service line providers.

Increase them as appropriate.

We have not heard that theres any particular.

References or delays and increasing credit lines because.

The issues in the market, but thats not to say that there maybe some of that going on in the background, but we're not hearing that directly.

Anything on the consumer side in terms of either.

Significantly higher rates in the wake of that collapse or just are not improving at the same rate on applications.

We have not with our model mix it continues to become higher and boats and most of those purchasers are cash only buyers or not.

Two rates, so we've not seen any significant impact on our <unk>.

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Attitudes of reactions to any particular types of boats that there.

Looking to receive from us so now that we've seen so far.

Perfect.

Thank you and then I'm curious just about inflation I'm not sure what visibility you have on the actual retail selling price of the boats that you sell but.

No during the pandemic dealers had an opportunity to get full MSRP, perhaps or even better.

But now it's a more competitive environment I'm, just curious from a consumer perspective.

What are both prices coal prices look like and some of your models are you seeing.

Inflation I guess.

Fade, a little bit from a consumer perspective.

I would say again.

This is Ben.

Sure.

The higher rates, we are incurring slightly higher dealer incentives because of the floor plan or program that we have in place where we sure will pay for a period of time.

Interest so that's.

That has an impact between us.

And in fact that this is impacting our margins are something that we are helping the dealers with respect to.

Rebuild their inventories.

But.

Not really.

Yes.

Yes.

Yeah, obviously the rate of inflation was increasing quite.

Quite rapidly during the pandemic and shortly thereafter, and some of that was driven by.

The material cost of making the boats in the supply chain issues. Those have cleared up some of those are the rate of inflation there for our manufacturing has slowed so that's.

Yes.

Pass along to the customer so it's not we don't anticipate.

Those are increasing at the same rate they had and then it's been mentioned at the same time.

We're seeing incentives.

For the dealers and so things are getting I guess a little bit.

Easier for customers to buy with us than maybe they were part of that is just supply and demand and some of Thats just pass along cost so as our cost normalize I think that cost and rate of increase.

Thanks for the end customer will normalize.

Yes, we're seeing ocado materials.

We've seen some.

And some of the cost some of them at many of manufacturing components are coming down.

As much we're certainly nearly as fast.

So ultimately as Mike said that that hopefully there won't be a need for large increases going forward.

But I guess were outscored my earlier comment.

Yes.

We have not seen any pressure to put any additional incentives in the system and as you also referred to we don't have direct visibility into what.

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In all cases, so we.

We expect that there will be some moderation there will be some.

More normalized discounting by dealers as we move forward I would expect that.

That will normalize so I think you're in the same way.

Sure.

That's great. Thank you so much.

Thanks, Craig Thank you.

As a reminder, if you would like to ask a question. Please press star one.

Go next to Fred Wightman at Wolf.

Hey, guys. Good morning, I wanted to follow up the comment in the release and the prepared remarks are set to winter boat shows were generally favorable which doesn't sound great. Honestly. So can you just give a little bit more detail on the retail environment. How it compares to sort of what you would've expected entering the started the <unk>.

Olander year or anything else, maybe more recent than that the winter boat shows.

Yes, Hey, Brett this is Jeff that comment was intentional.

There were.

It was mixed I mean, we had some boat shows where we sold.

More goes at the show more chaparral and robalo has been in the previous year. So those are very strong plus a lot of follow up as you know.

There are a lot of a lot of sales that are sort of.

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That were that were not as good in it there is no geographic.

Our demographic.

To identify the air in some cases, it might have been weather and things like that.

We also have noted that the spring is coming at a lag where you.

Live and where we live and some other places as well and so that is.

Delaying the impulse buyer coming in but.

Yes, the boat show season, with generally favorable or that language and there was no.

No.

So geographic or demographic kind of.

Trends to note there geographic I think Thats, where I think some of the larger shows were a little bit better.

Smaller shows from the smaller shows were little more lackluster if you will but just not.

Our strongest yes.

We attended a few of them.

Tim and I went to Miami and you wanted to start with an economic slowdown is trying to keep our word that Shannon, we and solid through our numbers clearly.

Well Theyre same story here in Atlanta, with Lojack <unk> pretty successful of course, this one kind of chaparral focused here.

But we heard some of the smaller boat shows maybe werent as.

Strong as they Werent 90 pre pandemic.

The bigger ones at least the ones that we attended <unk> great. So.

Next slide.

Yes.

Really helpful and I guess, just sort of outside of shows right sort of the normal day to day turning to color. You are hearing from dealers is that in line with sort of what they were thinking maybe a little bit softer given some of the weather issues, how would you sort of characterize.

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Boat show retail demand.

Hi, I think.

From the dealers perspective, just looking globally.

Kurt.

Orders at AAN and their expectations for the spring.

Little to no.

Pushed back on.

The boats that we plan to shift to the date of our drive we are talking to the dealers about what's going to be available in the coming weeks, we've had little to no.

Cancellations or deferrals on those theyre still willing to accept.

Many boats as we can reasonably shipped to them. So I think that bodes well overall.

Across our dealership.

Current demand seems to be good enough and they have enough confidence at this point in time.

We continue to take.

The votes are field inventory is.

It's up but it's probably only half the two thirds as large as it was kind of pre pandemic. So theres still a lot of.

Room there.

We're hopeful that there'll be a lot of sell through.

And those inventory levels.

Come down Iraqi moved through the selling season, so hopefully, we'll see that there'll still be plenty of room for them to take normal amounts of inventory.

Global retail selling season.

And to the end of the year. So we're still we still are very positive over the rest of the year, but as we mentioned in our comments, we're certainly watching very closely all of the things that we're talking about here in terms of.

Steve or behavior.

Economic weakness and all those sorts of things, but right now we see it for me.

Great question.

Great and then just the last one you guys mentioned some improvement in supply chain and improved component availability.

Where are the specific items that you are seeing some relief as it on outboard engines windshields.

Sort of wire harnesses like where are you seeing the biggest improvement.

I would say all of the above but it's kind of two steps forward one step back we had significant improvement in that well.

The issues getting our board interest spreads, but then the flip side is much much better than it was.

Last few quarters, which is why we were able to complete and ship one of those that we manufactured.

But it's still we're still not 100% through the woods, but it's just sort of all over the place does not just one thing it's like a game of whack a mole listen it's something Pops.

Pops up.

Yes also fed does Jim Transportation Center.

Yes, that's a great point, yet without access to transportation et cetera. So that's helpful.

Great. Thanks, a lot guys.

Thank you thanks, Rob Thanks, Brett.

And there are no further questions at this time I would like to turn the conference over to Jim Landers for closing remarks.

Okay. Thank you Andre.

Well, we appreciate everybody who called in and the questions. We hope everybody has a good day, we will talk to you soon.

And this concludes concludes todays conference call a replay of today's conference will be available on Marine products Corp, Dot com within two hours following the completion of the call.

You for your participation you may now disconnect.

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