MarineMax, Inc. — Q3 Fiscal 2021 Form 10-Q
Reporting period: Quarter and nine months ended June 30, 2021; unaudited. Amounts below are in millions of dollars unless stated otherwise. MarineMax sells and services recreational boats and yachts, provides related services, and, following its May 2021 acquisition of Cruisers Yachts, manufactures yachts.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $666.3 (+33.7%) | $498.3 | $1,600.9 (+44.1%) | $1,111.0 |
| Gross profit | $204.7 | $123.5 | $484.9 | $282.2 |
| Gross margin | 30.7% | 24.8% | 30.3% | 25.4% |
| Operating income | $80.9 | $48.6 | $165.8 | $74.0 |
| Net income | $59.6 | $34.9 | $122.2 | $49.1 |
| Diluted EPS | $2.59 | $1.58 | $5.33 | $2.23 |
- Q3 SG&A was $123.8 million, or 18.6% of revenue, versus $74.8 million, or 15.0%. Nine-month SG&A was $319.1 million, or 19.9%, versus $208.3 million, or 18.7%.
- Interest expense declined to $0.6 million in Q3 and $3.0 million for nine months, from $2.1 million and $8.5 million, respectively.
- Operating cash flow was $329.6 million for nine months, compared with $221.3 million. Investing used $131.1 million, including $111.7 million for acquisitions; financing used $154.1 million. Cash increased $44.6 million to $200.1 million.
- At June 30, cash was $200.1 million; current assets were $488.1 million and current liabilities $221.6 million. Inventory was $209.4 million, down from $298.0 million at September 30, 2020; customer deposits were $86.7 million, up from $31.8 million.
- Short-term borrowings were $2.9 million, with $102.9 million of additional borrowing availability under the then-current facility. Long-term debt, including current maturities and net of issuance costs, was approximately $51.7 million. Operating lease liabilities totaled $107.1 million.
Changes and significant developments
- Comparable-store sales increased 5.7% in Q3 and 20.7% for nine months. Remaining reported revenue growth came from acquisitions, openings, closures, and other locations outside the comparable-store base.
- Management attributed stronger gross margins primarily to demand-driven boat price increases and a greater contribution from higher-margin finance and insurance, brokerage, parts, service, storage, and superyacht brokerage activities. Higher SG&A reflected acquisitions and business mix.
- MarineMax acquired SkipperBud’s in October 2020 and Cruisers Yachts in May 2021. Cruisers Yachts’ reported results include only the period after May 2, 2021; comparable historical data was not practical to obtain. The acquisitions materially increased goodwill and intangible assets.
- The company introduced Retail Operations and Product Manufacturing reporting segments following the Cruisers Yachts acquisition. Nine-month reported manufacturing revenue was $20.4 million before $10.9 million of intersegment eliminations.
- During Q3, MarineMax repurchased 289,823 shares for approximately $13.7 million. The filing reports 21,745,395 common shares outstanding on July 23, 2021.
Outlook, risks, and contingencies
- No quantified earnings or revenue guidance is provided. Management said existing cash and capital resources should meet liquidity and capital needs for at least 12 months, except for possible significant acquisitions.
- On July 9, 2021, after quarter-end, the company amended its asset-based credit facility: availability increased from $440 million to $500 million and maturity extended to July 2024, with two one-year renewal options subject to lender approval.
- Management described COVID-19’s future effects on consumer demand as uncertain. Risks discussed include the cyclical and seasonal nature of recreational boating, weather and hurricanes, economic weakness and reduced luxury spending, reliance on manufacturers and credit availability, and acquisition integration. Florida represented about 54% of revenue in fiscal 2019 and 2020.
- A 100-basis-point increase in variable short-term borrowing rates was estimated to increase annual pretax interest expense by approximately $0.1 million, based on the June 30 balance. The company was in compliance with credit-facility covenants at quarter-end.
- Ordinary-course legal proceedings were not expected by management to have a material adverse effect. The filing reports no material long-lived asset impairment and no goodwill impairment requirement at June 30. Disclosure controls were assessed as effective at a reasonable-assurance level.
Investor verification points
- Confirm how much of the sales and margin growth reflects demand and pricing versus acquisitions, and whether elevated margins are sustainable.
- Review acquisition purchase-price allocations, integration progress, and the earnings contribution and comparability of SkipperBud’s and Cruisers Yachts.
- Track inventory, customer deposits, cash conversion, and borrowing-base availability, particularly as seasonal working-capital needs change.
- Assess the amended credit facility’s terms and covenants, debt and lease obligations, and the effect of interest rates and credit conditions.
- Reconcile the filing’s location counts: the notes cite 77 retail locations at June 30, while MD&A refers to 78 current locations.