MarineMax, Inc. — Form 10-Q Summary
Reporting period: First quarter of fiscal 2021, the three months ended December 31, 2020. Comparisons are with the three months ended December 31, 2019. MarineMax operates recreational boat and yacht retail, brokerage, service, marina/storage, and related financing and insurance businesses.
Financial performance and liquidity
Amounts below are in millions, except per-share data and percentages.
| Metric | Q1 FY2021 | Q1 FY2020 |
|---|---|---|
| Revenue | $411.5 | $304.2 |
| Gross profit / gross margin | $123.4 / 30.0% | $80.0 / 26.3% |
| SG&A | $91.4 | $64.4 |
| Income from operations | $32.0 | $15.6 |
| Interest expense | $1.3 | $3.3 |
| Net income / diluted EPS | $23.6 / $1.04 | $9.1 / $0.41 |
| Cash used in operating activities | $12.8 | $19.3 |
| Cash used in investing activities | $55.2 | $4.4 |
| Cash provided by financing activities | $33.1 | $21.0 |
- Revenue increased 35.3%; comparable-store sales rose 20.2%. Management attributed growth to demand-driven increases in new and used boat sales and higher-margin finance and insurance, brokerage, parts, service, and storage activities. Acquired and other non-comparable operations contributed $45.8 million of the revenue increase.
- Gross profit grew 54.2%. Operating income was $32.0 million, or approximately 7.8% of revenue, versus $15.6 million, or 5.1%, a year earlier. Net margin was approximately 5.7%, versus 3.0%.
- At December 31, cash was $120.9 million, down from $155.5 million at September 30, 2020. Current assets were $558.4 million and current liabilities $321.2 million; the current ratio was approximately 1.74.
- Inventory rose to $378.9 million from $298.0 million at September 30. Operating cash use reflected inventory growth and other working-capital movements, partly offset by net income and increased customer deposits.
- Short-term borrowings were $163.4 million. Long-term debt, including current maturities, totaled approximately $52.8 million. The asset-based credit facility has a stated maximum of $440 million; borrowing-base availability was approximately $133.4 million. The company reported covenant compliance.
Material changes and unusual items
- In October 2020, MarineMax acquired SkipperBud’s for stated total consideration of $58.5 million, including $8.2 million of estimated contingent consideration. The purchase-price allocation was preliminary and included $56.4 million of goodwill. SkipperBud’s contributed approximately $40.4 million in revenue and $1.9 million in pretax income during the quarter.
- Investing cash outflow included $48.3 million used for acquisitions, net of cash acquired, and $7.0 million of property and equipment purchases. SkipperBud’s also increased goodwill and other intangible assets, which rose to $143.1 million from $84.3 million at September 30.
- Interest expense fell 60.6%, primarily due to lower interest rates and borrowings. The effective tax rate declined to 23.2% from 26.3%, which the company attributed primarily to excess equity compensation for tax purposes.
- Operating lease right-of-use assets and liabilities increased substantially, primarily reflecting acquired leases. Lease liabilities totaled $108.1 million at December 31.
Outlook, risks, and contingencies
- Management said existing capital resources and cash generated from sales should be adequate for operations and capital requirements for at least the next 12 months, except for possible significant acquisitions. No numerical earnings or revenue guidance was provided.
- COVID-19 impacts remained uncertain. Most stores were fully or partially operational; the company described using private showings, virtual appointments, and its digital platform. The filing cautions that the period’s results may not indicate future results.
- The business is seasonal and cyclical, exposed to consumer confidence and discretionary spending, weather and storms, and changing credit availability and interest rates. Florida generated approximately 54% of fiscal 2020 revenue. The company also depends on manufacturer and dealer agreements; new Brunswick boats represented approximately 33% of fiscal 2020 revenue.
- A 100-basis-point increase in variable short-term borrowing rates was estimated to increase annual pretax interest expense by approximately $1.6 million, assuming no mitigating actions or additional manufacturer interest assistance.
- Ordinary-course legal matters were not expected by management to have a material adverse effect. The filing reported no new risk factors. Disclosure controls were considered effective; integration of SkipperBud’s accounting processes and controls was ongoing.
Investor verification priorities
- Assess whether the demand, comparable-store growth, and elevated gross margins persist, and how much growth reflects acquisitions versus existing operations.
- Review SkipperBud’s final purchase accounting, earnout assumptions and potential payments, and integration progress.
- Monitor inventory levels, seasonal cash use, customer deposits, and actual borrowing-base availability under the credit facility.
- Evaluate exposure to COVID-19, consumer demand, weather, interest rates, and key boat manufacturers and dealership agreements.
- Confirm the effect of lease obligations and acquisition-related goodwill and intangibles on future costs and impairment risk.