Q4 2024 Marine Products Corp Earnings Call

Ladies and gentlemen, please standby the call will begin shortly until that time your lines will again be placed on music hold thank you for your patience.

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Ladies and gentlemen, I'm, so sorry for the long haul it can't be used to standby our call will begin shortly again the call will begin shortly thank you.

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Speaker Change: Guaranteeing technical difficulties I really do appreciate your patience. Please continue to standby the call will begin shortly.

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Good morning, and thank you for joining us for Marine products Corporation fourth quarter, and you and Johnny 24 Financial earnings Conference call.

Speaker Change: Today's call will be hosted by Pam Palmer, our president and CEO and Mike Smith, Chief Financial Officer.

Speaker Change: This time, all participants are in listen only mode.

Speaker Change: During the presentation, we will conduct a question and answer session instructions will be provided at that time for you to queue up for questions I.

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

Schmidt: Now I'll turn the call over to Mr. Schmidt.

Schmidt: Thank you and good morning.

Schmidt: Before we begin I want to remind you that some of the statements that will be made on this call could be forward looking in nature and reflect a number of them.

Schmidt: Main risks.

Schmidt: Please refer to our press release issued today, along with our 'twenty to 'twenty, three 10-K, and other public filings that outline those risks.

All of which can be found at www Dot Marine products Corp Dotcom.

Schmidt: In today's earnings release and conference call.

Schmidt: We'll be referring to several non-GAAP measures of operating performance and liquidity.

Schmidt: We believe these non-GAAP measures allow us to compare performance consistently over various periods.

Schmidt: Our press release and our website contain reconciliations of these non-GAAP measures the most directly comparable GAAP measures.

Speaker Change: I'll now turn the call over to our President and CEO Ben Palmer.

Speaker Change: Thank you Mike and thank you all for joining our call Paul jobs for the for the issues we've had there.

Speaker Change: Uh huh.

Speaker Change: Fourth quarter results were negative as compared to prior year.

Speaker Change: However, we are seeing early signs of stabilization in our path to turning the corner toward growth later this year.

Speaker Change: The marine industry continues to push through a lackluster period.

Speaker Change: Sentiment remains cautious, but perhaps best characterized this shifting from cautious and concerned to cautiously optimistic.

Speaker Change: During this past year, we have been laser focused on managing costs and production levels as tightly as possible without disrupting our business jeopardizing, our ability to our ability to support our dealers when industry demand picks back up.

Speaker Change: Channel inventory has been the most acute challenge facing us and our peers in 2024.

Speaker Change: We're pleased to share that our field inventory ended the year about 15% lower than prior year.

Speaker Change: We feel we have been true partners to our dealers back conservatively managing our field inventory.

Speaker Change: While dealer inventories did increase sequentially from the end of the third quarter, it's our normal seasonal seasonal pattern as dealers position themselves for the winter boat shows in the spring selling season.

Speaker Change: The 15% field inventory declined versus last year reflects some sell through of older models.

Speaker Change: Bottom line. This has not been an easy journey.

Speaker Change: Navigating channel inventory excesses over the last 18 months.

Speaker Change: But we are pleased where we've landed and with our current position, especially relative to some of our competitors in categories, where we don't compete.

Speaker Change: With respect to interest rates and dealer and consumer sentiment following the election and transition to a new presidential administration.

Speaker Change: We are encouraged by the general optimism for improved business conditions.

Speaker Change: After some interest rate reductions there are mixed signals on the near term direction of rates, but we believe they will likely be neutral to favorable going forward.

Speaker Change: So purely anecdotal our dealers are expressing a hopeful sentiment for consumer demand.

Speaker Change: With the election behind us since some closure to the general political uncertainty from the second half of 2024, we have concern where consumers will steadily come back into the market.

Speaker Change: Feedback from winter boat shows thus far is that they are well attended by credible buyers expressing renewed interest.

Speaker Change: So a few bars conveyed a sense of urgency. We also heard some bars you had purchased their first both during the pandemic, we're already considering upgrades to a newer and newer larger model.

Speaker Change: Cash borrowers will likely be the first area of strength, we see but we also heard some feedback that entry level buyer showed interest as well.

Speaker Change: An encouraging sign for consumers looking to finance their boat purchases again, these are anecdotal and directional comments, but we hope they are the precursor.

Speaker Change: Our improved demand as the year progresses.

Speaker Change: 2024 also marks from investments in our business, we expect to help improve operations and results this coming year.

Speaker Change: With higher than normal downtime, we worked on our efficiencies and streamline some of our shop or operations that they run more profitably.

Speaker Change: Especially when production volumes increase.

Speaker Change: In addition, we completed the installation of solar panels that are national Georgia manufacturing facility.

Speaker Change: We received some attractive tax incentives and expect to generate strong electricity cost savings going forward from this investment.

Speaker Change: We're also proud of the environmental benefits this project will deliver.

Mike Smith: And now Mike will provide an overview of the financial results.

Mike Smith: Thanks, Dan.

Mike Smith: I'll start with a few quick financial highlights for the year and then go into some more detail on the fourth quarter.

Mike Smith: For the full year 2020 for sale.

Mike Smith: Sales were $237 million down 38% versus last year.

Mike Smith: Diluted EPS was <unk> 50.

Mike Smith: <unk> $2 21, and EBITDA was down from $52 million to $21 million.

Mike Smith: We generated strong operating cash flow of $30 million and free cash flow of $25 million cap.

Mike Smith: Capex was $5 million and included the investment in our solar panel project.

Mike Smith: For the year, we paid $44 million in dividends, including $24 million in the form of a special dividend.

Mike Smith: Finish 'twenty 'twenty, four with cash of $52 million and no debt.

Mike Smith: Additionally, our board of directors declared a regular quarterly dividend of <unk> 14 per share this week, which will be payable in March.

Mike Smith: Shifting to the fourth quarter with year over year comparisons to the fourth quarter of 2023 sales were down 33% to $47 $8 million.

Mike Smith: Driven by a 39% decrease in the number of boats sold.

Mike Smith: Price and mix net of deposits 6%.

Mike Smith: We noted the quarterly sales decreases ease throughout the year.

Mike Smith: We would expect year over year comparisons to be fairly muted in the first half of 2025.

Mike Smith: With potential to deliver sales growth versus prior year in the second half of 2025.

Mike Smith: Gross profit decreased to $9 $2 million with a gross profit margin of 19, 2% up 20 basis points.

Mike Smith: Part of the gross margin percentage increased with a favorable comparison and promotional expenses incurred versus last year's fourth quarter, when we resumed incentive programs.

Mike Smith: SG&A expenses were $5 $6 million in the quarter down, 28% or $2 $2 million compared to last year's fourth quarter.

Mike Smith: These expenses decreased primarily due to costs that vary with sales and profitability such as incentive compensation sales commissions and warranty expenses.

Mike Smith: SG&A as a percentage of sales was 11, 6% up 70 basis points compared to the prior year's fourth quarter.

Mike Smith: Of note, we generated a tax benefit of $71000 in the fourth quarter, despite having positive pre tax income.

Mike Smith: We received a tax credit for solar panel installation project, which more than offset.

Mike Smith: What would have been our normal tax provision.

Mike Smith: Diluted EPS was <unk> 12 in the fourth quarter down from 16 last year.

Mike Smith: EBITDA was $4 $4 million down from $6 5 million.

Dan: I'll now turn it back over to Dan for a few closing remarks.

Dan: Thanks, Mike.

Dan: Despite a challenging year, we are proud of our ability to remain solidly profitable generate robust cash flow and provide significant cash returns to our investors through our regular quarterly and our special dividend mid year.

Dan: 2024 saw weak.

Dan: Market demand, but we managed prudently through this period and believe the worst is past, we proud ourselves on consistent and conservative financial management and emerge in 2024 with a strong balance sheet that can support investments in the business and continued dividends to our investors.

Dan: Over time, if we do not deploy substantial capital we will look at further actions to return cash to our to our investors.

Dan: As we wrap up the call I'd also like to highlight two milestones coming up this summer in August we will mark the 25th anniversary of Marine products, becoming a public company.

Dan: Also this past year, we marked the sixth anniversary of the chaparral brand.

Dan: Celebrating with our dealers at our annual dealer conference in the Florida Keys.

Dan: We have many employees and dealers that have been with us for multiple decades and on this occasion I just want to thank everyone involved in our long term success for their dedication partnership and support.

Dan: And with that operator, please open up the line for questions.

Dan: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we will pause for just a moment to compile the Q&A roster.

Dan: Yeah.

Speaker Change: Your first question comes from the line of Griffin, Brian with D. A Davidson. Your line is now open. Please go ahead.

Speaker Change: Hi, guys. Good morning, So we've heard some mixed results from dealers and Oems. This morning about performance at boat shows.

Speaker Change: Speak here relative strength versus maybe some of your peers and then kind of like you guys have any expectations for the upcoming Miami Michelle.

Speaker Change: In general, Yes, I mean, it's been mixed but again I think overall there is.

Speaker Change: Positive undertone I think everybody.

Speaker Change: Feeling some of that optimism.

Speaker Change: I think theres still trying to find some strength and build a foundation going forward.

Speaker Change: We're hopeful that things will continue to improve into the spring selling season.

Speaker Change: Regarding any upcoming shows including Miami.

Speaker Change: We'll be there all force well.

Speaker Change: Represented by our.

Speaker Change: Dealers and.

Speaker Change: And our management team. So we're hopeful we know it will probably be a slow slog.

Speaker Change: No improvement in demand.

Speaker Change: But we're looking forward to it and we feel like we're well positioned once things.

Speaker Change: Demand does.

Speaker Change: Pick up.

Speaker Change: Great and then what are you seeing from a promotional aspect that these shows so far.

Speaker Change: Assuming it's still competitive, but maybe just some high level comments on what you've seen.

Speaker Change: Sure.

Speaker Change: You know a lot of that incentives are.

Speaker Change: Similar to what we saw last year.

Speaker Change: I think we don't have a lot of older units that were trying to push we obviously have some but a lot of the better incentives are.

Speaker Change: Trying to clear some of that documents Laurie.

Speaker Change: We've seen those are some of the stronger ones, but a lot of them, including ours are pretty consistent to what we've seen over the last year. We've also seen some dealers and larger.

Speaker Change: Dealer groups, starting to provide some incentives as well.

Speaker Change: But we started seeing that last year. So you know the best the best incentives are obviously does where theyre trying to get rid of some old inventory.

Speaker Change: Overall, we don't see anything really slowly, but I didn't see any material differences from some of the incentives we saw kind of last year.

Speaker Change: Got it makes sense and then you mentioned that you're pleased with your level of Destocking.

Speaker Change: Imply that you guys are at optimal levels for your brands or is there more destocking that will be needed as we get into this new year.

Speaker Change: It's a good question I mean, the fact that.

Speaker Change: We think build inventories are closer to normal levels dealers are still.

I must say reluctant to order, but certainly are being very thoughtful about it.

Speaker Change: So.

Speaker Change: So we're just working closely with them, we're trying to meet that right equilibrium between.

Speaker Change: We're just trying to create the right equilibrium.

Speaker Change: With incentives, helping our dealers and providing some support to them by helping with retail incentives as well so.

Speaker Change: Well just athletic let it play out but again, we feel we feel good where we stand then and are pleased that our dealers are feeling some degree of optimism.

Speaker Change: Well, we will assess further as we complete the winter boat shows and get into the spring selling season. So you are now is a key time.

Speaker Change: To be watching.

Speaker Change: Watching their sentiment and the order flow.

Speaker Change: We expect.

Speaker Change: Okay got it so are there any categories.

Speaker Change: Specifically that are a little bit more bloated right now as compared to David on what do you guys plan or some of the.

Speaker Change: Alternate ones.

Speaker Change: Don't necessarily plan.

Speaker Change: Okay.

Speaker Change:

Speaker Change: We.

Speaker Change: We've heard in an observed we don't have all that information specific Lee and it is a little.

Speaker Change: Brand brand, but.

Speaker Change: Right.

Speaker Change: In terms of obviously, we are in the fire glass market.

Speaker Change: Some of the aluminum market.

Speaker Change: I think here's ads.

Speaker Change: Some.

Speaker Change: More inventory then.

Speaker Change: And then they would desire and of course.

Speaker Change: Any oversupply in those categories don't directly impact us, but certainly as it can also be a drag so.

Speaker Change: So there is probably one of those areas.

Speaker Change: Got you last one for me can you just get an update on the current M&A environment.

Speaker Change: We're seeing any relative uptick any activity with the slightly lower rates in the new administration in office.

Speaker Change: Sure sure.

Speaker Change: We have started to see some opportunities pop up but not a lot of great brands.

Speaker Change: This distress a lot of them are distressed situations.

Speaker Change: What we've seen so we're actively looking.

Speaker Change: We're more focused on finding.

Speaker Change: And that would be a good fit for us and good fit for our existing dealers.

Speaker Change: And wouldn't be a direct competitor necessarily with our current brand so.

Speaker Change: <unk>.

Speaker Change: There hasn't been a ton of opportunities in sort of the sweet spot we're looking for.

Speaker Change: And.

Speaker Change: But we're hopeful that as things are now stabilizing and as you mentioned interest rates have come down a little and as they come down a little more perhaps there will be opportunities.

Speaker Change: But we are actively looking in.

Speaker Change: Hopefully we will see some that are a better fit for us coming up this year.

Speaker Change: Awesome, that's all for me thanks, guys.

Speaker Change: Thanks Griffin I appreciate it.

Speaker Change: Again, if you would like to ask a question. Please.

Speaker Change: Please press star one on your telephone keypad.

Speaker Change: There are no further questions at this time that concludes our Q&A session I will now turn the conference over.

Speaker Change: Thanks.

Speaker Change: Alright. Thank you very much I appreciate everyone, who called in to listen and again apologize for the issues. There on the front end, but I appreciate your patience.

Speaker Change: Have a good rest of the debt.

Speaker Change: Yeah.

Speaker Change: Ladies and gentlemen that concludes today's call. We thank you for joining and we apologize for the technical issues earlier, please be reminded that the conference call will be repaid on marine products Corp, Dot com within two hours. Following the completion of the call you may now disconnect.

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