Marine Products Q4 2024 Earnings Report

Marine Products EPS Results

• Actual EPS: $0.12
• Consensus EPS: $0.05
• Beat/Miss: Beat by +$0.07
• One Year Ago EPS: N/A

Marine Products Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $46.30 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Marine Products Announcement Details

• Quarter: Q4 2024
• Date: 1/30/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, January 30, 2025
• Conference Call Time: 8:00AM ET

Marine Products (NYSE:MPX) designs, manufactures, and sells recreational fiberglass powerboats for the sport boat and sport fishing boat markets worldwide. The company offers Chaparral sterndrive pleasure boats, including SSi Sport Boats, SSX Sport Boats, and the Surf Series; Chaparral outboard pleasure boats, which include OSX Luxury Sportboats and SSi outboard models; and Robalo outboard sport fishing boats. It also provides center and dual consoles, and Cayman Bay Boats under the Robalo brand name. The company sells its products to a network of domestic and international independent authorized dealers. Marine Products Corporation was founded in 1965 and is based in Atlanta, Georgia. Marine Products Corporation operates as a subsidiary of LOR, Inc.

Marine Products Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good morning and thank you for joining us for Marine Products Corporation 4th Quarter and Year End 2024 Financial Earnings Conference Call.

[Operator]

Today's call will be hosted by Pen Palmer, President and CEO and Mike Smith, Chief Financial Officer. At this time, all participants are in listen only mode. I would like to advise everyone that this conference call is being recorded. I will now turn the call over to Mr. Schmidt.

[Michael Schmit, CFO, VP & Corporate Secretary at Marine Products]

Thank you, and good morning. Before we begin, I want to remind you that some of the statements that will be made on this call could be forward looking in nature and reflect a number of known and unknown risks. Please refer to our press release issued today along with our 2023 10 ks and other public filings that outline those risks, all of which can be found at www.marineproductscorp.com. In today's earnings release and conference call, we'll be referring to several non GAAP measures of operating performance and liquidity. We believe these non GAAP measures allow us to compare performance consistently over various periods.

[Michael Schmit, CFO, VP & Corporate Secretary at Marine Products]

Our press release and our website contain reconciliations of these non GAAP measures to the most directly comparable GAAP measures. I'll now turn the call over to our President and CEO, Ben Palmer.

[Ben Palmer, President & CEO at Marine Products]

Thank you, Mike, and thank you all for joining our call. I apologize for the issues we've had there. 4th quarter results were negative compared to prior year. However, we are seeing early signs of stabilization and a path to turning the corner toward growth later this year. The marine industry continues to push through a lackluster period.

[Ben Palmer, President & CEO at Marine Products]

Sentiment remains cautious, but perhaps best characterized as shifting from cautious and concerned to cautiously optimistic. During this past year, we have been laser focused on managing costs and production levels as tightly as possible without disrupting our business and jeopardizing our ability to support our dealers when industry demand picks back up. Channel inventory has been the most acute challenge facing us and our peers in 20 24. We are pleased to share that our field inventory ended the year about 15% lower than prior year. We feel we have been true partners to our dealers by conservatively managing our field inventory.

[Ben Palmer, President & CEO at Marine Products]

While dealer inventories did increase sequentially from the end of Q3, it's our normal seasonal pattern as dealers position themselves for the winter boat shows and the spring selling season. The 15% field inventory decline versus last year reflects some sell through of older models. Bottom line, this has not been an easy journey, navigating channel inventory excesses over the last 18 months. But we are pleased where we've landed and with our current position, especially relative to some of our competitors and categories where we don't compete. With respect to interest rates and dealer and consumer sentiment following the election and transition to a new presidential administration, we are encouraged by the general optimism for improved business conditions.

[Ben Palmer, President & CEO at Marine Products]

After some interest rate reductions, there are mixed signals on the near term direction of rates, but we purely anecdotal, our dealers are expressing a hopeful sentiment for consumer demand. With the election behind us and some closure to the general political uncertainty from the second half of twenty twenty four, we hope consumers will steadily come back into the market. Feedback from winter boat shows thus far is that they are well attended by credible buyers expressing renewed interest. So few buyers conveyed a sense of urgency. We also heard some buyers who had purchased their first boat during the pandemic were already considering upgrades to a newer and or larger model.

[Ben Palmer, President & CEO at Marine Products]

Cash buyers will likely be the 1st area of strength we see, but we also heard some feedback that entry level buyers showed interest as well, an encouraging sign for consumers looking to finance their boat purchases. Again, these are anecdotal and directional comments, but we hope they are the precursor for improved demand as the year progresses. 2024 also marks some investments in our business we expect to help improve operations and results this coming year. With higher than normal downtime, we worked on our efficiencies and streamlined some of our shop floor operations that they run more profitably, especially when production volumes increase. In addition, we completed the installation of solar panels at our National Georgia manufacturing facility.

[Ben Palmer, President & CEO at Marine Products]

We received some attractive tax incentives and expect to generate strong electricity cost savings going forward from this investment. We are also proud of the environmental benefits this project will deliver. And now Mike will provide an overview of the financial results.

[Michael Schmit, CFO, VP & Corporate Secretary at Marine Products]

Thanks, Ben. I'll start with a few quick financial highlights for the year and then go into some more detail on the Q4. For the full year 2024, sales were $237,000,000 down 38% versus last year. Diluted EPS was $0.50 compared to $1.21 and EBITDA was down from $52,000,000 to $21,000,000 We generated strong operating cash flow of $30,000,000 and free cash flow of $25,000,000 CapEx was $5,000,000 and included the investment in our solar panel project. For the year, we paid $44,000,000 in dividends, including $24,000,000 in the form of special dividend, and we finished 2024 with cash of $52,000,000 and no debt.

[Michael Schmit, CFO, VP & Corporate Secretary at Marine Products]

Additionally, our Board of Directors declared a regular quarterly dividend of $0.14 per share this week, which will be payable in March. Shifting to the Q4 with year over year comparisons to the Q4 of 2023, sales were down 33 percent to $47,800,000 driven by a 39% decrease in the number of boats sold. Price and mix netted deposit 6%. We noted that quarterly sales decreases eased throughout the year. We would expect year over year comparisons to be fairly muted in the first half of twenty twenty five, with potential to deliver sales growth versus prior year in the second half of twenty twenty five.

[Michael Schmit, CFO, VP & Corporate Secretary at Marine Products]

Gross profit decreased to $9,200,000 with a gross profit margin of 19.2%, up 20 basis points. Part of the gross margin percentage increase was a favorable comparison on promotional expenses incurred versus last year's Q4 when we resumed incentive programs. SG and A expenses were $5,600,000 in the quarter, down 28% or $2,200,000 compared to last year's Q4. These expenses decreased primarily due to costs that vary with sales and profitability, such as incentive compensation, sales commissions and warranty expenses. SG and A as a percentage of sales was 11.6%, up 70 basis points compared to the prior year's Q4.

[Michael Schmit, CFO, VP & Corporate Secretary at Marine Products]

Of note, we generated a tax benefit of $71,000 in the 4th quarter despite having positive pre tax income. We received a tax credit for our solar panel installation project, which more than offset, which what would have been our normal tax provision. Diluted EPS was $0.12 in the 4th quarter, down from $0.16 last year. EBITDA was $4,400,000 down from $6,500,000 I'll now turn it back over to Ben for a

[Ben Palmer, President & CEO at Marine Products]

few closing remarks. Thanks, Mike. Quite a challenging year, we are proud of our ability to remain solidly profitable, generate robust cash flow and provide significant cash returns to our investors through our regular quarterly and our special dividend mid year. 2024 saw weak end market demand, but we managed prudently through this period and believe the worst has passed. We pride ourselves on consistent and conservative financial management and emerge from 2024 with a strong balance sheet that can support investments in the business and continued dividends to our investors.

[Ben Palmer, President & CEO at Marine Products]

Over time, if we do not deploy substantial capital, we will look at further actions to return cash to our investors. As we wrap up the call, I'd also like to highlight 2 milestones. Coming up this summer in August, we will mark the 25th anniversary of Marine Products becoming a public company. Also this past year, we marked the 60th anniversary of the Chaparral brand, celebrating with our dealers at our annual dealer conference in the Florida Keys. We have many employees and dealers that have been with us for multiple decades.

[Ben Palmer, President & CEO at Marine Products]

And on this occasion, I just want to thank everyone involved in our long term success for the dedication, partnership and support. And with that, operator, please open up the line for questions.

[Operator]

Your first question comes from the line of Griffin Bryant with D. A. Davidson. Your line is now open. Please go ahead.

[Griffin Bryan, Senior Equity Research Associate at D.A. Davidson Companies]

Hi, guys. Good morning. So we've heard some mixed results from dealers and OEMs this morning about performance at boat shows. Can you kind of speak to your relative strength versus maybe some of your peers? And then kind of like do you guys have any expectations for the upcoming Miami show?

[Ben Palmer, President & CEO at Marine Products]

In general, yes, I mean, it's been mixed. But again, I think overall there's positive undertone. I think everybody is feeling some of that optimism. I think there's still trying to find some strength and build a foundation going forward. We're hopeful that things will continue to improve into the spring selling season.

[Ben Palmer, President & CEO at Marine Products]

As regarding any upcoming shows, including Miami, we'll be there full force, well represented by dealers and our management team. So we're hopeful. We know it will probably be a slow improvement in demand, but we're looking forward to it and we feel like we're well positioned once things demand does pick up.

[Griffin Bryan, Senior Equity Research Associate at D.A. Davidson Companies]

Great. And then what have you seen from a promotional aspect that these shows so far? I'm assuming it's still competitive, but maybe just some high level comments on what you've seen?

[Michael Schmit, CFO, VP & Corporate Secretary at Marine Products]

Sure. A lot of the incentives are similar to what we saw last year. I think we don't have a lot of older units that we're trying to push. We obviously have some, but a lot of the better incentives are still trying to clear some of that back inventory that we've seen. Those are some of the stronger ones, but a lot of them, including ours, are pretty consistent to what we've seen over the last year.

[Michael Schmit, CFO, VP & Corporate Secretary at Marine Products]

We've also seen some dealers and larger dealer groups starting to provide some incentives as well. But we started seeing that last year. So the best incentives are obviously those where they're trying to get rid of some old inventory. But overall, we don't see anything really slowing, but I didn't see any material differences from some of the incentives we saw kind of last year.

[Griffin Bryan, Senior Equity Research Associate at D.A. Davidson Companies]

Got it. Makes sense. And then you mentioned that you're pleased with your level of destocking. Does that imply that you guys are at optimal levels for your brands? Or is there more destocking that will be needed as we get into this new year?

[Ben Palmer, President & CEO at Marine Products]

It's a good question. I mean the fact that we think field inventories are closer to normal levels. Dealers are still, I don't want to say reluctant to order, but certainly are being very thoughtful about it. So we're just working closely with them. We're trying to meet that right equilibrium between we're just trying to create the right equilibrium with incentives, helping our dealers and providing some support to them by helping with retail incentives as well.

[Ben Palmer, President & CEO at Marine Products]

So we'll just have to let it play out. But again, we feel good where we stand and are pleased that our dealers are feeling some degree of optimism. We'll assess further as we complete the winter boat shows and get into the spring selling season. So now is a key time to be watching their sentiment and the order flow that we expect.

[Griffin Bryan, Senior Equity Research Associate at D.A. Davidson Companies]

Got it. So are there any categories specifically that are a little bit more bloated right now as compared to maybe the ones that you guys play in or some of the alternate ones that you don't necessarily play in?

[Ben Palmer, President & CEO at Marine Products]

We've heard and observed, we don't have all that information specifically and it is a little bit brand to brand. But in terms of obviously, we're in the fiberglass market. Some of the aluminum market, I think has had some more inventory than they would desire. And of course, any oversupply in those categories don't directly impact us, but certainly is it can also be a drag. So aluminum is probably one of those areas.

[Griffin Bryan, Senior Equity Research Associate at D.A. Davidson Companies]

Got you. Last one for me. So if we can just get an update on the current M and A environment and if you're seeing any relative uptick in activity with the slightly lower rates in the new administration in office?

[Michael Schmit, CFO, VP & Corporate Secretary at Marine Products]

Sure. We have started to see some opportunities pop up, but not a lot of great brands that we that distract a lot of them are in distressed situations what we've seen. So we are actively looking, but we're more focused on finding a brand that would be a good fit for us and good fit for our existing dealers and wouldn't be a direct competitor necessarily with our current brands. So there hasn't been a ton of opportunities in sort of the sweet spot we're looking for. And but we're hopeful that as things are now stabilizing and as you mentioned, interest rates have come down a little and as they come down a little more, perhaps there will be opportunities.

[Michael Schmit, CFO, VP & Corporate Secretary at Marine Products]

But we are actively looking and hopefully we'll see some that are a better fit for us coming up this year.

[Griffin Bryan, Senior Equity Research Associate at D.A. Davidson Companies]

Awesome. That's all for me. Thanks guys.

[Michael Schmit, CFO, VP & Corporate Secretary at Marine Products]

Thanks, Griffin. Appreciate it.

[Operator]

There are no further questions at this time. That concludes our Q and A session. I will now turn the conference over to Ben.

[Ben Palmer, President & CEO at Marine Products]

Thank you very much. I appreciate everyone who called in to listen. And again, apologize for the issues there on the front end. I appreciate your patience. Have a good rest of the day.

[Operator]

Ladies and gentlemen, that concludes today's call. We thank you for joining, and we apologize for the technical issues earlier. Please be reminded that the conference call will be replayed on marineproductcorp.com within 2 hours following the completion of the call. You may now disconnect.

Participants

Executives

• Michael Schmit, CFO, VP & Corporate Secretary
• Ben Palmer, President & CEO

Analysts

• Griffin Bryan, Senior Equity Research Associate at D.A. Davidson Companies