MarineMax, Inc. (NYSE: HZO) — Form 10-Q
Reporting period: Fiscal second quarter and six months ended March 31, 2024. Amounts below are in U.S. dollars; financial statement amounts are in millions unless noted.
Business context
MarineMax operates recreational boat and yacht dealerships, marinas, superyacht brokerage and services, yacht charter operations, and boat manufacturing. Its reportable segments are Retail Operations and Product Manufacturing. It reported 83 retail locations across 21 states and more than 130 locations worldwide, including marina and storage sites.
Financial performance
| Metric | Three months ended March 31 | Six months ended March 31 |
|---|---|---|
| Revenue, 2024 | $582.9 | $1,110.2 |
| Revenue, 2023 | $570.3 | $1,078.3 |
| Gross profit, 2024 | $190.4 | $365.9 |
| Gross margin, 2024 (2023) | 32.7% (35.2%) | 33.0% (36.0%) |
| Operating income, 2024 | $21.4 | $40.4 |
| Interest expense, 2024 | $19.4 | $37.7 |
| Net income, 2024 | $1.4 | $2.3 |
| Net income attributable to MarineMax, 2024 | $1.6 | $2.5 |
| Diluted EPS, 2024 (2023) | $0.07 ($1.35) | $0.11 ($2.23) |
Quarterly revenue increased 2.2% year over year; six-month revenue rose 3.0%. Management attributed comparable-store growth to new and used boat sales and contributions from higher-margin businesses. Product Manufacturing revenue declined, and its operating segment recorded a $0.9 million loss in the quarter versus $6.2 million of income a year earlier. Retail Operations operating income fell to $20.7 million from $53.7 million.
Management said lower new- and used-boat margins, as the company drove sales in a softer retail environment, reduced gross margin. SG&A rose 16.2% in the quarter and 10.0% for six months, primarily due to inflation and acquisitions. Interest expense increased with higher rates and borrowings associated mainly with higher inventory.
Cash flow, balance sheet and liquidity
- Six-month operating cash outflow was $111.2 million, compared with $250.5 million in 2023. Investing cash outflow was $49.9 million, versus $524.2 million, largely reflecting the prior-year IGY Marinas acquisition. Financing provided $175.4 million, mainly from increased floor-plan borrowings.
- Cash and cash equivalents were $216.7 million at March 31, 2024, up from $201.5 million at September 30, 2023. Inventory increased to $932.6 million from $812.8 million.
- Current assets were $1,292.9 million and current liabilities $1,045.6 million. The company used $139.7 million of cash in operating activities and purchases of property and equipment over the six-month period.
- Floor-plan borrowings were $736.7 million, with approximately $4.9 million of additional floor-plan availability. Long-term debt, including current maturities and net of issuance costs, was approximately $406.4 million. The floor-plan rate was approximately 8.8% at March 31, 2024, compared with 5.9% a year earlier.
- Under its credit facility, the company also reported approximately $88 million available on its revolving facility and $100 million available under the delayed-draw mortgage facility; no amounts were drawn on either facility. It was in compliance with credit covenants at quarter-end.
Outlook, risks and unusual items
No specific revenue or earnings guidance was provided. Management said cash generated from sales and existing capital resources should be adequate for liquidity and capital needs for at least the next 12 months and thereafter, except in the event of possible significant acquisitions. It continues to view acquisitions as a growth strategy, subject to economic conditions and suitable targets.
- Management cited higher interest rates, inflation, uncertain consumer demand, possible recession, industry cyclicality, and seasonality as risks. Weather and storms can disrupt operations or damage inventory and facilities. Higher rates also affect customer financing and company borrowing costs.
- A 100-basis-point increase in interest rates was estimated to add approximately $11 million to annual pretax interest expense, based on March 31 debt balances and assuming no mitigating actions.
- On April 11, 2024, Mexican authorities seized the assets of Cabo Marina, an IGY subsidiary, and took control of the Port of Cabo San Lucas after rejecting its concession application and initiating a sanctioning procedure. MarineMax disputes the action, is pursuing government engagement, and may take legal action. The marina represented less than 4% of consolidated assets and less than 1% of revenue as of and for fiscal 2023.
- The company reported ordinary-course legal proceedings that it did not expect to have a material adverse effect. It stated that disclosure controls were effective and reported no material changes in internal control over financial reporting.
Important facts for investors to verify
- Whether boat margins and operating profitability stabilize after the reported year-over-year declines.
- Inventory levels, floor-plan utilization and remaining borrowing availability, particularly given the higher floor-plan interest rate.
- Progress and financial impact of the Cabo Marina dispute, including any operational interruption or legal developments.
- Whether acquisition-related costs and contingent consideration affect future expenses, cash needs or debt capacity.
- Consumer demand, interest-rate sensitivity and seasonal trends as the company moves through the remainder of fiscal 2024.