MarineMax, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended March 31, 2021; comparisons are with the corresponding 2020 periods. Amounts below are in millions except per-share data.
Business context
MarineMax is a U.S. recreational boat and yacht retailer, also providing brokerage, service, storage, financing and insurance-related products. At quarter-end it operated 77 retail locations in 21 states and yacht businesses internationally. In October 2020, it acquired SkipperBud’s, expanding its Great Lakes and West Coast presence.
Financial performance
| Metric | Three months ended March 31 | Six months ended March 31 |
|---|---|---|
| Revenue | $523.1 vs. $308.5; up 69.6% | $934.6 vs. $612.6; up 52.6% |
| Gross profit / margin | $156.8 / 30.0%, vs. $78.8 / 25.5% | $280.2 / 30.0%, vs. $158.8 / 25.9% |
| SG&A / percentage of revenue | $103.9 / 19.9%, vs. $69.1 / 22.4% | $195.4 / 20.9%, vs. $133.4 / 21.8% |
| Operating income / margin | $52.9 / 10.1%, vs. $9.7 / 3.1% | $84.9 / 9.1%, vs. $25.3 / 4.1% |
| Interest expense | $1.1 vs. $3.0 | $2.4 vs. $6.4 |
| Net income | $38.9 vs. $5.1 | $62.5 vs. $14.1 |
| Diluted EPS | $1.69 vs. $0.23 | $2.73 vs. $0.64 |
Management attributed growth to strong demand for new and used boats and increased sales in finance and insurance products, brokerage, parts, service and storage. Comparable-store sales rose 45.5% in the quarter and 32.9% for the six-month period; other growth came from acquisitions and locations outside the comparable-store base. Higher boat margins and a greater contribution from higher-margin businesses supported gross-margin expansion. SG&A grew in dollars but declined as a share of revenue, reflecting operating leverage and efficiencies.
Cash flow, balance sheet and liquidity
- Six-month operating cash flow was $146.6, compared with cash used of $18.6 in 2020. The 2021 result included inventory reductions and higher customer deposits and accrued liabilities.
- Investing cash outflow was $64.3, including $50.3 for acquisitions and $12.1 for property and equipment. Financing cash outflow was $95.1, principally reflecting net repayments of short-term borrowings.
- Cash was $142.9 at March 31, 2021, down from $155.5 at September 30, 2020. Current assets were $515.1 and current liabilities $240.2.
- Short-term borrowings were $35.8; long-term debt was $52.2 including current maturities, or $49.4 net of current maturities and issuance costs. The company also reported $181 of additional borrowing availability under its asset-based facility, subject to borrowing-base limits. The facility has a stated maximum of $440 and expires in May 2023, subject to possible extensions.
- Operating lease liabilities totaled $108.7. Cash exceeded reported borrowings at quarter-end, before considering lease liabilities.
MarineMax said existing capital resources and cash generated from sales should be adequate for operations and capital needs for at least 12 months, except for possible significant acquisitions. It was in compliance with its credit-facility covenants.
Acquisition and other notable items
SkipperBud’s was acquired in October 2020 for a stated cash purchase price of $55.0 million, subject to adjustments, plus contingent consideration valued at $8.2 million; the earnout can reach approximately $9.3 million. The acquisition added $56.4 million of goodwill and $2.0 million of identifiable intangibles. For the six months ended March 31, 2021, SkipperBud’s contributed approximately $108.4 million of revenue and $7.9 million of estimated pretax income. The filing does not provide comparable 2020 results for the acquired business.
The company reported no material change to critical accounting policies, no material adverse effect expected from ordinary-course legal proceedings, and no separate risk-factor updates in this 10-Q. Disclosure controls were considered effective; integration of SkipperBud’s accounting processes and controls was ongoing.
Outlook and principal risks
- No numerical earnings or revenue guidance was provided. Management described demand and the future impact of COVID-19 as uncertain and said it would continue monitoring conditions.
- Results are seasonal and sensitive to weather, consumer confidence, discretionary spending and the cyclical recreational boating market. The company cautioned that luxury-goods demand may be disproportionately affected by downturns.
- Inventory financing depends on the credit facility, borrowing-base availability and covenant compliance. A 100-basis-point increase in short-term borrowing rates was estimated to add approximately $0.4 million in annual pretax interest expense, based on quarter-end debt.
- Manufacturer and brand relationships are important; new Brunswick boats represented approximately 33% of fiscal 2020 revenue. Changes to dealership agreements, supply availability or credit conditions could adversely affect results.
- Foreign currency movements may affect pricing and profitability of imported products and international yacht operations. The company said it was not then using foreign-currency hedges.
Important facts for investors to verify
- Whether strong comparable-store demand and improved boat margins persist, and how much growth reflects acquisitions rather than existing operations.
- Whether inventory, customer deposits and other working-capital movements support repeatable operating cash flow.
- SkipperBud’s integration, realized performance, earnout exposure and goodwill valuation.
- Borrowing-base availability, seasonal inventory financing needs and continued compliance with facility covenants.
- Exposure to COVID-19 developments, weather, consumer spending, manufacturer concentration and interest-rate changes.