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spk01: Good morning, and thank you for joining us for Marine Product Corporation's Third Quarter 2022 Financial Earnings Conference Call. Today's call will be hosted by Ben Palmer, President and CEO, and Mike Schmidt, Chief Financial Officer. Also hosting is Jim Landers, Vice President of Corporate Services. At this time, all participants are in a 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 questions. I would like to advise everyone that this conference call is being recorded. Jim will get us started by reading the forward-looking disclaimer.
spk04: Good morning, and thank you. Before we get started today, I'd like to remind everyone that some of the statements that we'll make on this call may be forward-looking in nature and reflect a number of known and unknown risks. I'd like to refer you to our press release issue today, our 2021 Form 10-K, and other SEC filings that outline those risks. all of which are available on our website at MarineProductsCorp.com. If you have not received our press release, please visit our website. In today's earnings release and conference call, we will refer to EBITDA, which is a non-GAAP measure of operating performance. We use this non-GAAP measure because it allows us to compare performance consistently over various periods without regard to changes in our capital structure. Our press release issued this morning and our website contain a reconciliation of this non-GAAP financial measure to net income, which is the nearest GAAP financial measure. Please review this disclosure if you're interested in seeing how it's calculated. We'll make a few comments about this quarter and then be available for your questions. I will turn the call over to our President and CEO, Ben Palmer.
spk03: Ben Palmer Jim, thanks, and thank you all for joining our call this morning. Let me begin with a few highlights regarding our third quarter 2022 earnings press release that was issued this morning. Marine Products Corporation recorded record quarterly net sales during the third quarter, as our average selling prices for the boats increased by 33% compared to the third quarter of 2021. This improvement in average selling prices was due to a favorable model mix, as well as price increases we instituted to cover higher costs of primarily materials and components. The unit sales volume this quarter was essentially the same as in the prior year third quarter. The backlog of firm orders, coupled with other strong purchase indications from dealers, remains high as we continue to exercise our best efforts to meet extraordinary levels of demand. Dealer inventory levels remain at historic lows. We also announced this morning that our board of directors declared an increased regular quarterly cash dividend of 14 cents per share. This 17% increase represents an immediate and tangible means of sharing our financial success with our shareholders and expresses confidence in our business to the investment community. With that overview, I'd like to turn the call over to Mike Smith, our CFO.
spk02: Thanks, Ben. I'll begin with an overview of the company's third quarter 2022 financial results. Net sales for the third quarter were a record $100.1 million, a 32% increase to the third quarter of last year. As Ben mentioned, average selling price of our boats increased by 33% through the increases in response to higher supplier costs and a favorable model mix. Parts and accessory sales were also higher in the third quarter compared to the third quarter of last year. The number of units sold during the quarter was relatively flat the same quarter last year. Gross profit in the third quarter was $25 million, a 56% increase compared to the third quarter of 2021. Gross margin during the quarter increased to 25% compared to 21% in the third quarter of last year. Gross margin as a percentage of net sales also improved primarily due to price increases in the favorable model mix. Selling general and administrative expenses were $10.3 million, a 34% increase compared to $7.7 million in the third quarter of last year. These expenses were 10% of net sales in both years, and the increase in total dollars were due to the costs that vary with higher sales and profitability, such as incentive compensation, sales commissions, and warranty expenses. EBITDA in the third quarter was $15.2 million, an increase of $6.4 million, or 72% compared to the third quarter of last year. We reported a record quarterly net income of $11.5 million, a 72% increase compared to $6.7 million in the third quarter of 2021. Diluted earnings per share were 34 cents, also a quarterly record, compared to 20 cents in the third quarter of last year. Our international sales, which account for approximately 5% of our total sales, increased by 52% compared to the third quarter of last year. This sales increase was evenly distributed among our international markets. Our cash balance at the end of the third quarter was $26.7 million, a $12.8 million increase compared to the cash balance at the end of last year. Increase in cash since the end of last year is due to sales growth and profitability partially offset by increases in working capital requirements required to support production during a time when supply chain disruptions continue to impact shipments, although these issues are beginning to improve, as we mentioned. Dealer inventories continue to be at historically low levels and are now slightly lower than they were at the end of the second quarter of 2022. Our backlog, coupled with other firm indications of demand, continues to be high. As the 2023 model year begins, we are coordinating with our dealer network to prioritize our production to fulfill firm orders they have taken from retail customers who are waiting on their new boats in the coming months. Of course, our dealer network also wants to build inventory to showcase our products and meet new retail demand, especially as we look towards the winter boat show season and the retail selling season which follows. I'll now turn it back over to Ben for a few closing remarks.
spk03: Thanks. Our record results this quarter are the result of the hard work of our management team and dedicated employees who continue to produce and deliver quality products in a very challenging operating environment. We also want to recognize our network of loyal dealers who unfailingly serve as strong brand ambassadors and without whom we could not be successful. One of our strengths is our successful, consistent research and development effort directed towards improving our portfolio of products. As we roll out our 23 models, two of them really stand out. Both are in the 25-foot range. One is a Revalo and the other is a Chaparral. I'll ask Jim Landers to preview these models that received a highly favorable response from our dealers during the 2023 Chaparral and Revalo dealer conference we held in August.
spk04: Certainly Ben, glad to. The Reballo 250 center console occupies a really nice space between our 23 and 27 foot Reballos. It's powered by twin outboards like her larger sister ship. The high belt line design for the 2023 Reballo 250 provides more deck and cockpit space than a boater might expect for a boat of this size. And unlike many other coastal offshore fishing boats, This boat has a large amount of very comfortable bow seating with a standard removable backrest. The aft transom seat folds flush to the aft bulkhead to increase fishing space when you're using it for fishing. Her fishing features include a large fish box, a live well, rod holders, a side entry door, and a fiberglass hardtop. Reviewers thus far have also noted that the boat comes up on plane very quickly and has a tight turning radius. Another 25-foot boat that's new for 2023 is the Chaparral 250 OSX. This new outboard sport luxury model is the smallest in Chaparral's OSX lineup and was designed as a luxurious day boat for an active family and continues Chaparral's tradition of building attractive bow riders. The space that would have been occupied by a stern drive engine a generation ago is now used for storage and features comfortable seats that convert to aft-facing lounges. The raised belt line and padded bolsters on this boat make the numerous passenger seating spaces drier and more comfortable in rough seas. Along with our other 2023 models, this boat features our new Envision marine silicone upholstery. It's soft, it's easy to clean, and resists sun damage and scratches. There are many other thoughtful options for an active family group, including a transom stereo, an air pump, and a water sports arch tower, which can be raised and lowered at the touch of a button so that the helmsman doesn't have to leave the helm seat when the arch tower is being raised and lowered.
spk03: Great. Thank you, Jim. The updated market share statistics for the 12 months into June 30, 2022, indicate that the combination of Revalo and Chaparral outboards in the 18 to 36 foot category had a market share of 6.1%. A Revalo brand by itself holds the third highest market share in this category. Chaparral held a market share of 21.1% in the 21 to 34 foot stern drive category, which was the second highest in this category. I'd like to thank you for joining us this morning and we'll be happy to take any questions that you have.
spk01: If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, please press star one again.
spk00: We'll pause for just a moment to compile the Q&A roster. And once again, to ask a question, please press star followed by the number one on your telephone keypad. And we have no questions. I'd like to turn the call back over to Jim Landers for closing remarks.
spk04: Okay, thank you. We appreciate everybody who called in and listened this morning. We hope you have a good day, and we will talk to you soon. Thanks.
spk01: This concludes today's conference call. A replay will be available on the company's website at marineproductscorp.com two hours following the completion of today's call. Thank you for your participation, and you may now disconnect.
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