Marine Products Corporation Q3 FY2024 earnings call

• Navigating a tough demand environment in the marine industry, with dealers being cautious on new orders.
• Reduced costs through manufacturing headcount reductions and scaled back production.
• Field inventory levels of products have come down, with field units down 13% sequentially compared to prior year.
• Extended promotional programs and enhanced third-party floor plan financing.
• Welcomed the first interest rate cut in several years in September, seeing it as a step toward reducing dealer costs and consumers’ borrowing costs.
• Held an August dealer conference in South Florida, unveiled new models across Chaparral and Robalo lineups with positive dealer response.

For the third quarter of 2024 compared to the third quarter of 2023, sales were down 36% to $49.9 million, driven by a 40% decrease in the number of boats sold. Gross profit decreased to $9.2 million with a gross margin of 18.4%, down 630 basis points versus last year. SG&A expenses were $5.6 million in the quarter, down 36% or $3.1 million compared to last year’s third quarter. Diluted EPS was $0.10 in the third quarter, down from $0.30 last year. EBITDA was $4.3 million, down from $13 million last year. Year-to-date, operating cash flow was $24.9 million and free cash flow was $21.3 million. CapEx was $3.6 million in the third quarter and is expected to be approximately $5 million for the full year.

• Expect CapEx to be approximately $5 million for the full year.
• Returned significant cash to investors through dividends and special dividend.
• Have ample liquidity to navigate the down cycle, make business investments, and explore acquisition opportunities.
• Monitor demand and interest rate trends as they plan for 2025.

• Weak end market demand continuing to impact results.
• Potential impact on operations if substantial capital is not deployed.
• Minor ordering delays in the fourth quarter due to Hurricane Milton.

Q: How did the cadence of retail play out throughout the quarter and whether it marks the bottom?

A: Ben Palmer mentioned that the team has done well reducing production levels leading to a decline in field inventory, noting it's a good sign though hard to pinpoint specific drivers.

Q: Thoughts on dealer levels and dealers’ appetite for model 2025 units?

A: Ben Palmer said they're comfortable with current field inventory, dealers are stepping up, and they're working with dealers to get reasonable order flow for 2025 models.

Q: Promotional philosophy in the current retail environment?

A: Ben Palmer stated their promotional program is closer to traditional, not super aggressive as inventory levels are reasonable.

Q: Comment on M&A market in marine and current competitor exiting?

A: Mike Schmit said they've been looking at M&A opportunities, see some deals out there as positive for companies with strong balance sheets.

Q: When rate cuts will impact retail demand and forecasting rate cuts for 2025?

A: Ben Palmer said it's hard to predict, they'll monitor, and Mike Schmit added things are heading in the right direction with floor plan financing enhancements.