MarineMax, Inc. — Fiscal 2022 First Quarter Form 10-Q
Reporting period: Three months ended December 31, 2021, compared with the three months ended December 31, 2020, unless otherwise noted. Amounts are in U.S. dollars; financial statement amounts are in millions except per-share data. MarineMax operates boat retail, brokerage, service, storage, yacht charter and manufacturing businesses.
Financial performance
| Metric | Q1 FY2022 | Q1 FY2021 | Change |
|---|---|---|---|
| Revenue | $472.7 million | $411.5 million | +14.9% |
| Gross profit / gross margin | $167.2 million / 35.4% | $123.4 million / 30.0% | Gross profit +35.5% |
| SG&A / percentage of revenue | $120.0 million / 25.4% | $91.4 million / 22.2% | Expense +31.3% |
| Operating income | $47.2 million | $32.0 million | +47.6% |
| Net income | $35.9 million | $23.6 million | +52.3% |
| Diluted EPS | $1.59 | $1.04 | +52.9% |
| Interest expense | $0.6 million | $1.3 million | −53.8% |
Management attributed revenue growth to an 8.9% increase in comparable-store sales and a $24.6 million net contribution from locations and businesses outside the comparable-store base, including manufacturing. Higher boat margins and a greater contribution from higher-margin finance, insurance, brokerage, parts, service, storage and superyacht services lifted gross margin. SG&A rose faster than revenue, partly because of acquisitions and the mix of higher-margin businesses, which management said typically have higher expense structures.
Retail Operations reported revenue of $454.6 million and operating income of $45.1 million; Product Manufacturing reported revenue of $34.2 million and operating income of $3.4 million. Intersegment revenue and operating income eliminations were $16.2 million and $1.4 million, respectively.
Cash flow, debt and liquidity
- Operating cash flow: Provided $8.1 million, versus $12.8 million used in the prior-year quarter. Inventory growth used $70.3 million of cash, partly offset by customer deposits and reduced receivables.
- Investing and financing: Investing activities used $92.6 million, including $67.1 million for acquisitions and $23.9 million for property and equipment. Financing activities provided $79.0 million, primarily from increased short-term borrowings. Cash decreased $5.9 million during the quarter to $216.3 million.
- Balance-sheet liquidity: At December 31, 2021, current assets were $597.9 million and current liabilities were $379.9 million (current ratio approximately 1.57). Inventory was $325.4 million and customer deposits were $144.6 million.
- Borrowings: Short-term borrowings were $113.5 million and long-term debt, net of current maturities and debt issuance costs, was $46.6 million. The asset-based credit facility has stated availability up to $500 million, subject to its borrowing base; actual additional borrowing availability was $19.4 million at quarter-end. The company was in compliance with its covenants.
- Interest-rate exposure: Management estimated that a hypothetical 100-basis-point rate increase would add approximately $1.5 million to annual pretax interest expense, based on quarter-end debt and specified assumptions.
Acquisitions, outlook and risks
- In November 2021, MarineMax acquired Intrepid, a powerboat manufacturer, and Texas MasterCraft, a watersports dealer. The acquisitions involved approximately $67.1 million of consideration, net of acquired cash, including estimated contingent consideration. Purchase-price allocations were preliminary; approximately $39.5 million of goodwill was recorded.
- Management said acquisitions remain an important growth strategy and stated that existing cash generation and capital resources were expected to meet liquidity and capital needs for at least the next 12 months, except for possible significant acquisitions. The filing provides no specific earnings or revenue guidance.
- Management described boating as seasonal and cyclical, with generally lower sales and higher inventory and borrowings in the December and March quarters outside Florida. Risks include discretionary consumer demand, economic conditions, weather, COVID-19 uncertainty, manufacturer and supply-chain dependence, acquisition integration, and borrowing availability and interest rates. Currency movements may also affect foreign products and international operations.
- The filing reports ordinary-course legal proceedings that management did not believe would have a material adverse effect. Contingent consideration liabilities were $15.5 million at quarter-end. Management reported disclosure controls were effective; integration of Intrepid’s accounting processes and controls was underway. No material changes to reported risk factors were identified in this 10-Q.
Most important facts for investors to verify
- Whether demand, pricing and elevated gross margins persist, and whether SG&A growth moderates.
- Inventory levels, customer deposits and the borrowing base available under the credit facility, particularly through seasonal periods.
- Integration progress and final purchase accounting for Intrepid and Texas MasterCraft, including acquisition returns and contingent consideration.
- Cash generation after capital expenditures and acquisitions, and the company’s ability to fund further acquisitions without materially increasing debt.
- Exposure to interest rates, consumer spending, manufacturer relationships, weather and COVID-19-related disruption.