Marine Products Corporation (NYSE: NYSE:MPX) reported its financial results for the first quarter of 2024, revealing a decrease in sales and earnings per share compared to the prior year. Despite these challenges, the company expressed a sense of stability and improvement in profitability on a sequential basis from the fourth quarter of 2023.
The company's production levels have been adjusted to align with current demand, with a production scale back of approximately mid-30% range below peak production rates in the first half of 2023. Marine Products Corporation also announced a regular quarterly dividend and a special dividend, continuing its history of returning capital to shareholders.
Key Takeaways
- Sales dropped by 42% to $69.3 million, with a 40% decrease in the number of boats sold.
- Gross profit declined by 52% to $14 million, and gross margin decreased by 420 basis points.
- Sequential improvement in gross margin from 19% in Q4 2023 to over 20% in Q1 2024.
- SG&A expenses fell by 40% to $8.7 million due to variable costs associated with sales and profitability.
- Diluted EPS was down to $0.13 from $0.34 the previous year.
- EBITDA was $5.9 million, a decrease from $15 million, with EBITDA margin dropping by 410 basis points.
- A regular quarterly dividend of $0.14 per share and a special dividend of $0.70 per share were announced.
Company Outlook
- The company expects sales to be relatively stable sequentially, with cost reductions and normalized incentives leading to stable margins.
- Marine Products Corporation is focusing on operational improvements during the current slowdown.
- The company remains proactive in managing costs and production schedules.
Bearish Highlights
- Dealer channels are still dealing with high inventory levels and are hesitant to order aggressively due to uncertain demand and increased floor plan carrying costs.
- Year-over-year comparisons were challenging, with significant drops in sales and profitability metrics.
Bullish Highlights
- Positive reception at early 2024 boat shows, with customers excited about the product lineup.
- Larger priced boats, often purchased by cash buyers, sold better than smaller, lower-priced boats.
- The company maintains a debt-free balance sheet, strong cash generation, and over $80 million in cash, providing ample liquidity for investments and acquisitions.
Misses
- Sales and profitability did not meet the previous year's record highs, reflecting a post-pandemic demand normalization.
Q&A Highlights
- The company has set production levels based on firm orders and is hopeful for an increase in production in the coming quarters.
- Retail incentives are expected to remain in place throughout the selling season, with the current level of incentives considered normal.
- Marine Products Corporation's dealer network is reported to be in good health, with no current concerns despite the challenges in the industry.
In summary, Marine Products Corporation is navigating a soft market by adjusting its production and focusing on operational efficiencies. The company's financial discipline and strong cash position have allowed it to continue its commitment to shareholder returns through dividends. With a cautious but stable outlook, Marine Products Corporation is preparing for the prime selling season ahead.
InvestingPro Insights
Marine Products Corporation (NYSE: MPX) has demonstrated financial resilience, as reflected in the latest data from InvestingPro. Let's delve into some key metrics and tips that can provide investors with a deeper understanding of the company's current financial health and future prospects.
InvestingPro Data:
- Market Cap (Adjusted): $390.18M USD
- P/E Ratio (Adjusted) last twelve months as of Q4 2023: 9.35
- Dividend Yield as of April 2024: 5.05%
These figures suggest that while the company is facing a downturn in sales, it maintains a solid market capitalization and an attractive dividend yield, which could be appealing to income-focused investors. The P/E ratio indicates that the stock is trading at a reasonable valuation relative to its earnings.
InvestingPro Tips:
1. Marine Products Corporation has raised its dividend for 3 consecutive years and has maintained dividend payments for 13 consecutive years, signaling a commitment to returning value to shareholders even during challenging times.
2. Analysts predict the company will be profitable this year, which is an encouraging sign for potential investors looking for stability in earnings.
For investors seeking more detailed analysis and additional insights, there are 5 more InvestingPro Tips available at: https://www.investing.com/pro/MPX. These tips could provide valuable information for making informed investment decisions. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes access to these valuable tips and much more.
Full transcript - Marine Products Corp (MPX) Q1 2024:
Operator: Good morning, and thank you for joining us for Marine Products Corporation's First Quarter 2024 Financial Earnings Conference Call. Today's call will be hosted by Ben Palmer, President and CEO; and Mike Schmit, Chief Financial Officer. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session, instructions will be provided at that time for you to queue up for question. I would like to advise everyone that this conference call is being recorded. I will now turn the call over to Mr. Schmit.
Mike Schmit: 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-K 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. Our press release issued today and our website contain reconciliations of these non-GAAP measures to most directly comparable GAAP measures. I'll now turn the call over to our President and CEO, Ben Palmer.
Ben Palmer: Thanks, Mike, and thank you all for joining our call. Before we get started, I'd like to take a moment to share some unfortunate and sad news. Our long-time Head of Investor Relations and Vice President of Corporate Services, Jim Landers, passed away a few weeks ago after a long and courageous battle with cancer. I worked closely with Jim here at Marine Products for more than 20 years, and he was a tremendous contributor to the company in so many ways. And I'm sure those of you listening today, who were lucky enough to work with him over the years, he was also a great friend and colleague. He will truly be missed by all of us. Shifting to our results. First quarter results showed signs of stability on the top line and some improvement in profitability sequentially compared to the fourth quarter of last year. However, year-over-year comparisons were very challenging, consistent with the near-term expectations were signaled on our last call. Both the quarter played out generally as we anticipated and our discussion today might feel quite similar to our last call, as the key things remain very much the same. Overall, our industry is still contending with the dealer channel that is flushed with inventory and hesitant to order aggressively in the face of uncertain demand and higher floor plan carrying costs. We are being proactive in managing costs and production schedules during this soft period. As we said last quarter, we have reduced our production levels to be more in line with current demand as our dealers work through showroom inventories. This production scale back was in order of magnitude of around mid-30% range below our peak production rates in the first half of 2023. Although, we would certainly want our plans to be this year with more production to fill orders, we are taking advantage of this slowdown to execute operational projects we were unable to undertake during our periods of surgeon demand from the pandemic through mid-2023. Examples include projects to maintain repair tooling, improved consistency of lamination and other assembly processes and evaluate alternative production schedules. With regard to dealer inventory, I'd like to remind comments from last quarter that we remain pretty comfortable with the level of our products in the deal. But we continue to hear that high inventories are still an issue for many dealers, often in categories where we do not compete. We would note that our fuel inventory DNS is solidly below pre-pandemic levels. However, we may not return to those levels regardless of demand, given the new normal of higher carrying costs. We continue to have attractive retail incentives in the marketplace and are encouraged to see monthly sales trends for our dealers, reflecting the typical ramp-up throughout the first quarter. There was positive reception at most of the early 2024 boat shows with customers excited about our product lineup. Consistent with recent trends since the rise in interest rates are larger priced boats, which are often purchased by cash buyers, sold better in smaller, lower priced boats, which are often financed purchases. Speaking of borrowing costs, it is worth noting that there remains a great deal of uncertainty regarding the timing and magnitude of a potential decline in interest rates. So there has been broad consensus for multiple rate cuts by the Fed during 2024. Expectations have clearly moderated with mixed economic data cloud in the interest rate outlook. While this is a macro factor out of our hands, we will focus on things within our control. We are navigating the current environment with a focus on cost and efficiencies making the best of this law by executing multiple projects to improve our operations and continuing to support our dealers and maximize our partnerships. Now, Mike will provide an overview of the financial results.
Mike Schmit: Thanks, Ben. For the first quarter of 2024 compared to the first quarter of 2023. Sales were down 42% to $69.3 million, driven by a 40% decrease in the number of those sold. Price to mix netted to a negative 2%. Of note, last year's first quarter sales of $119 million were the highest in company's history, as we were still experiencing unprecedented post-pandemic demand at that time last year. Gross profit decreased 52% to $14 million, with gross margin of 20.2%, down 420 basis points versus last year. Although recall, we had an outsized impact on gross margin in the fourth quarter from the initiation of our traditional retail incentive program. So we were encouraged to see the sequential increase in gross margin from 19% in the fourth quarter of '23, back to over the 20% mark in the first quarter of '24. SG&A expenses were $8.7 million in the quarter, down 40% or $5.8 million compared to last year's first quarter. These expenses decreased due to costs that vary with sales and profitability, such as incentive compensation, sales conditions and warranty expenses. In addition, last year's first quarter results included a non-cash pension settlement charge of $2.1 million. Diluted EPS was $0.13 in the first quarter down from $0.34 last year. EBITDA was $5.9 million, down from $15 million and EBITDA margin decreasing 410 basis points to 8.5%. Year-over-year comparisons were obviously difficult for the first quarter, and they remain soft in the near term. It should become less pronounced later this year. While we don't give explicit financial guidance, directionally, we believe sequential sales will be relatively stable and our cost reductions and normalizes incentives should result in stable margins as well. I'll now turn it back over to Ben for a few closing remarks on capital allocation, including the special dividend we announced this morning.
Ben Palmer: Thanks, Mike. As headlines in our release this morning, our Board of Directors approved a $0.14 per share regular quarterly dividend and a $0.70 per share special dividend. In aggregate, these two upcoming dividends represent a $29 million tangible return of capital to our shareholders. While we have limited our stock repurchases in recent years due to our relatively small float, we're extremely proud of our track record for distributing cash back to our investors. For the five-year period from 2019 to 2023, we paid $85 million to our investors in dividends. Our ability to return capital to investors is a function of our financial discipline, strong cash generation and a debt-free balance sheet that allows all cash flow to benefit our equity holders. We ended the first quarter with over $80 million in cash and believe that even following the special dividend payment, we will have ample liquidity to pursue organic investments in the business, as well as maintain the flexibility to pursue strategic acquisitions. We continue actively assessing the marketplace for the right opportunity, the right valuation. Of course, over time, if we do not execute on transactions, we will look at further actions to return capital to our investors. Special dividends are naturally less consistent, but we have a track record for periodically returning the excess cash to our investors. These boost the total return of our potential return of our stock which already has an attractive dividend yield of around 5%. So before we turn the call over for questions, I'd like to thank our employees for their contributions every day, our dealers who continue to partner with us for mutual success. We're excited about entering the prime selling season and look forward to sharing results with you next quarter. With that, operator, please open up the line for questions.
Operator: We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from the line of Griffin Bryan with D.A. Davidson. Please go ahead.
Griffin Bryan: Yeah. Thanks. So I guess, first off, can you just give us some color on how you're thinking about your production schedule for the rest of the year? And are there any signs of retail sales inflections you're specifically looking forward to kind of turn that spigot back on?
Ben Palmer: This is Ben. Appropriate question. As we indicated, we've worked diligently to set our current production level of what we believe is the correct level for us. We are hopefully looking forward to the new model year, which we'll start soon and some of our new products that will be out there, we're really excited about. We're just going to have to wait and see. What we always do is set our production levels where we believe it's appropriate. We don't try to anticipate demand. We plan based on firm orders we have in hand. So we're going to have to work with our dealers. They're monitoring their field inventory. We're watching that as well. We're hopeful that once we get through this selling season and hopefully dealer inventories begin to settle out, we hope at that point, we'll be able to increase production. But at this point in time, we expect that the next change in production will be up, but we'll just have to wait instead. Again an appropriate question, but we're monitoring that and we'll adjust as appropriate.
Griffin Bryan: Yeah. Fair enough. And then you mentioned field inventory overall, right now is still too high. So can you just give us an idea of maybe any progress that's been made since the beginning of the year, and how long it may take to get back to a more normalized level, if that even is still a thing? I'm just kind of at the current retail run rate that we're seeing.
Ben Palmer: Well, what I would comment on is, again, when we look at our production rate and ship rate relative to retail sales and relative to our field inventory, we're comfortable where we are, again, indication being more that again ties back to the fact that we think the next move in our production schedule will be up, but we'll have to wait and see, wait for the order flow. But we are encouraged by the fact that there is some acceleration or some improvement in sales as normally happens this time of the quarter heading into the spring and summer. I wouldn't say it's extraordinary, but it's more normal. And so again, we are comfortable with our current production schedule and are looking forward as the opportunity to increased production, hopefully, sometime in the next quarter or two.
Griffin Bryan: Got it. And then with the promotions needed to incentivize the consumers, do you see these promotions continuing throughout the selling season? And do you think that should be able to get this pricing back sometime maybe this year, maybe that's next year? Just any color on that would be great.
Ben Palmer: We very meticulously evaluate and design and manage our retail programs. We're very particular about that. We do expect that the programs will stay in place throughout the selling season, that's not abnormal. I would say the level of our incentives are attractive, but not outsized compared to prior years when we had retail incentives in place. So again, I would say, for us, things have normalized and they've normalized at this particular level of production relative to field inventory. We'll just have to see how the season plays out. We're comfortable with the design and size of the incentives at this point in time. But we always have the opportunity to make adjustments to those as needed. But I do expect there will be some incentive programs in place for the next couple of quarters.
Griffin Bryan: Got it. And then lastly, just with some recent news surrounding problems at kind of larger dealers, can you speak to your -- the current health of your dealer partners and maybe what their appetite is to take on new model years once those start rolling out?
Ben Palmer: Well, there has been a lot in the news about some dealers. We're glad to report that our relationships with our dealers are great. Our dealers are doing fine, but they -- everybody is struggling with the level of field inventory, but we're very comfortable. We're very diversified, both geographically and across our dealer network. We don't have -- currently not aware of any concerns with any particular dealer, but we are partnering with them with these retail programs and with our dealer incentive programs, and we're quite proud of them and very happy about our dealer network and the long standing relationships we have with them, they -- or certainly, we recognize that they are key to our success. They're doing a great job managing their businesses in this environment and we're happy and pleased and proud to be associated with each and every one of them.
Griffin Bryan: Appreciate it. Best of the luck in next quarter.
Mike Schmit: Thank you.
Ben Palmer: Thank you very much.
Operator: There are no further questions at this time. I will hand the call back over to Mr. Ben Palmer for closing remarks.
Ben Palmer: Well, thank you, everybody for listening in this morning. We appreciate it and look forward to catching up with you later. Have a good day.
Operator: Today's call will be available for replay on our website at marineproductscorp.com within 2 hours following the completion of the call. This does conclude today's conference call. Thank you all for joining. You may now disconnect.
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