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spk01: Good morning and thank you for joining us for Marine Products Corporation's first quarter 2023 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 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.
spk03: Thank you, Audra, and good morning. Before we get started today, I'd like to remind everyone that some of the statements that we will 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 2022 Form 10-K, and other SEC filings that outline those risks. all of which are available on our website at marineproductscorp.com. If you've not received our press release, please visit our website. On today's earnings release and conference call, we 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 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 now turn the call over to our President and CEO, Ben Palmer.
spk05: Thanks, Jim, and thank you all for joining our call this morning. I will begin with a few highlights regarding our Great Products Corporation once again generated record net sales from the first quarter as we experienced improvement in our supply chain issues and transportation availability relative to the prior year period. We were able to complete and ship a larger number of substantially completed boats in our inventory and deliver them to our dealers. Average selling prices increased primarily due to a favorable model mix at both Chaparral and Ravala. addition the increased unit shipments during the quarter allowed our dealers to begin building their inventory to prepare for the upcoming 2023 spring retail selling season dealer inventories are trending towards more normalized levels however inventory remains below pre-pandemic levels we also announced this morning that our order directors declared a regular quarterly cash dividend of 14 cents per share With that overview, I'll now turn the call over to Mike Smith, our CFO. Thanks, Ben.
spk06: I'll begin with an overview of the company's first quarter 2023 financial results. Net sales for the first quarter of 2023 were a record $118.9 million, a 55% increase compared to the first quarter of last year. Unit sales increased by 40%, and the average selling prices of our boats increased by 12%. As Ben mentioned, these increases were driven by our ability to complete and ship a favorable mix of boats to satisfy both dealer and retail demand as we continue to see significant improvements in our supply chain. Boat profit in the first quarter of 2003 was $29 million, a 58% increase compared to the first quarter of last year. Boat margins was 24.4%, a slight improvement over the 24.0% for the first quarter of 22, as we saw some benefits from manufacturing efficiency. Selling in general and administrative expenses for the first quarter of 23 were $14.5 million, an increase of 57% compared to $9.2 million in the first quarter of last year. This increase due to costs that typically increase with higher sales and profitability, such as incentive compensation, sales commissions, and warranty expenses. These first quarter of 2023 expenses also include a non-cash pension settlement charge of $2.1 million. Selling general and administrative expenses were 12% of net sales in the first quarter of both years. As we complete the final termination of our pension plan, which is expected in the second quarter, we do not expect to make any cash contributions in connection with the transfer of the plan liabilities to a third party because of the plan's fully funded status. EBITDA in the first quarter of 2023 was $15 million, an increase of 5.4 million, or 56%, compared to the first quarter of last year. We reported We reported a record quarterly net income of $11.5 million in the first quarter of this year, a 64% increase compared to $7.1 million in the same quarter of last year. Diluted earnings per share were $0.34 in the first quarter of this year compared to $0.21 in the first quarter of last year. Our international sales sales increased by 89% compared to last year. Our cash balance at the end of the first quarter of 23 was $62.6 million, a $19.4 million increase compared to the cash balance at the end of last year. This strong cash balance is the result of improvements in our logistical processes and availability of materials and components, which allow us to ship more boats than we produced previously. Dealer inventories are increasing towards more normalized levels, but continue to be lower than pre-pandemic levels. These moderately higher inventories will benefit our dealers as we enter into the height of the retail selling season. The outcome of the winter boat shows was generally favorable, and our dealers continue to request boats they have already sold to retail customers, as well as additional inventory for the upcoming selling season. Having said that, We continue to monitor macro indicators such as consumer confidence, slowing economic activity, and increasing interest rates, all of which could weaken demand for recreational boats. I'll now turn it back over to Ben for a few closing remarks. Thanks, Mike. Our market share remains strong. Chaparral's Stern Drive market share third highest market share in their size category.
spk05: Our successive quarters of record sales are the result of the hard work of the Chaperone Revalo management team and our other dedicated employees, as well as our strong dealer network, as well as the appeal of the quality and design of our products. I'd like to thank you for joining us this morning, and we'll be happy to take any questions that you have.
spk01: Thank you. At this time, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. We'll go first to Craig Kennison at Baird.
spk07: Thanks and good morning, everybody. And congratulations on the progress on your pension as well. My question was on Just the availability of credit. I'm wondering if there's been any change in credit availability in the wake of the recent bank collapses.
spk05: Greg, this is Ben. We certainly, the credit line providers to the dealers have, I would describe, been proactive in increasing the lines, but we've been successful in coordinating with them, the service line providers, to increase them as appropriate.
spk04: We have not heard that there's any particular references or delays in increasing credit lines because of the issues in the market, but that's not to say that there may be some of that going on in the background, but we're not hearing that directly.
spk07: Anything on the consumer side in terms of either significantly higher rates in the wake of that collapse or just not approving at the same rate on applications?
spk04: We have not. With our model mix, it continues to be kind of higher end boats, and most of those purchasers are Cash-only buyers are not as sensitive to rates, so we've not seen any significant impact on our results or any of the dealers' attitudes or reactions to any particular types of votes that they're looking to receive from us. So, none that we've seen so far.
spk07: Perfect. Thank you. And then I'm curious just about inflation. I'm not sure what visibility you have on the actual retail selling price of the boats that you sell, but I know during the pandemic, dealers had an opportunity to get full MSRP, perhaps, or even better, but now it's the more competitive environment. I'm just curious, from a consumer perspective, what do boat prices look like in some of your models? Are you seeing inflation, I guess, fade a little bit from a consumer perspective?
spk05: I would say, again, this has been that the higher rates, we are incurring slightly higher dealer incentives because of the floor plan program that we have in place where we share or pay for a period of time. their inventories, but not really.
spk06: Yeah, I'll throw this in, Mike. Obviously, the rate of inflation was increasing quite rapidly during the pandemic and shortly thereafter, and some of that was driven by the material cost of making the boats and the supply chain issues. As those have cleared up, some of those are you know, the rate of inflation there for our manufacturing has slowed. And so that's, you know, just passing along to the customer. So it's not, we don't anticipate the boats increasing at the same rate they had. And then, you know, as Ben mentioned, at the same time, we're seeing incentives, you know, for the dealers. And so things are getting, I guess, a little bit easier for customers to buy the boats than maybe they were. And part of that is just supply and demand. And some of that is just passing along costs. So as our costs normalize, I think the cost and rate of increase of products for the end customer will normalize also.
spk05: Yeah, we're seeing on kind of the material side, we've seen some reduction in some of the costs. Many of the manufacturing components aren't coming down as much or certainly nearly as fast. So ultimately, as Mike said, that that hopefully there won't be a need for large increases going forward. But I guess where I was going with my earlier comment was that we have not seen any pressure to put any additional incentives in the system. And as you also referred to, we don't have direct visibility into what dealers are charging the end consumer in all cases. So we We expect that there will be some moderation. There will be some more normalized discounting by dealers as we move forward. I would expect that to happen. That will normalize, I think, in the same way field inventory will normalize.
spk07: That's great. Thank you so much. Thanks, Greg. Thank you.
spk01: As a reminder, if you would like to ask a question, please press star 1. We'll go next to Fred Whiteman at Wolf.
spk02: Hey, guys. Good morning. I wanted to follow up the comment in the release and the prepared remarks was that the winter boat shows were generally favorable, which doesn't sound great, honestly. So can you just give a little bit more detail on the retail environment, how it compares to sort of what you would have expected entering the start of the calendar year or anything else maybe more recent than the winter boat shows? Yeah. Hey, Fred. This is Jim.
spk03: Yeah, that comment was intentional. There were It was mixed. I mean, we had some boat shows where we sold more boats at the show, more Chaparrals and Rivalos than in the previous year. So those are very strong, plus a lot of follow-up, as you know. There are a lot of sales that are sort of initiated at boat shows but not consummated. There were a few others that were not as good, and there's no geographic or demographic trend to identify there. In some cases it might have been weather and things like that. We also have noted that the spring is coming kind of late, both where you live and where we live and some other places as well. And so that is, you know, delaying the impulse fire coming in. But yeah, the boat show season was generally favorable. We'll repeat that language. And there was no, you know, there was no No geographic or demographic kind of trend to note there. Geographic, I think that's right.
spk05: I think some of the larger shows were a little bit better than some of the smaller shows. Some of the smaller shows were a little more lackluster, if you will. Not bad, but just not as strong as some of the larger.
spk06: Yeah, we attended a few of them. Like, Tim and I went to Miami, and you wouldn't have thought it was neat. You know, like, slow down and... How many people were at that show? And we saw it through our numbers, too. All the shows were really well there. Same story here in Atlanta. The boat show here was pretty successful. Of course, it was more kind of chaparral-focused here. But we heard some of the smaller boat shows maybe weren't as strong as they were maybe pre-pandemic. But I'd say the bigger ones, at least the ones that we attended in this room, seemed great. So, yeah.
spk02: Next, like Tim said. Really helpful. And I guess just sort of outside of shows, right, sort of the normal day-to-day, sort of the color you're hearing from dealers, is that in line with sort of what they were thinking, maybe a little bit softer given some of the weather issues? How would you sort of characterize the non-boat show retail demand?
spk05: I think from the dealer's perspective, you know, them just looking globally at their current orders in hand and their expectations for the spring, we have little to no pushback on the boats that we plan to ship to the dealers. We're talking to the dealers about what's going to be available in the coming weeks. We've had little to no cancellations or deferrals on those. They're still willing to accept as many boats as we can overall across our dealership that their current demand seems to be good enough and they have enough confidence at this point in time, as I said, to continue to take the votes. Our field inventory is up, but it's probably only half to two-thirds as large as it was pre-pandemic, so there's still a lot of room there. We're hopeful that there'll be a lot of sell through and those inventory levels typically come down after you move to the selling season. So hopefully we'll see that and there'll still be plenty of room for them to take normal amounts of inventory past the normal retail selling season and into the end of the year. So we still are very positive on the rest of the year, but We're watching very closely all of the things that we're talking about here in terms of dealer behavior, economic weakness, and all those sorts of things. But right now, we see it remaining quite strong.
spk02: Great. And then just the last one, you guys mentioned some improvement in supply chain and improved component availability. Where are the specific items that you're seeing some relief? Is it on outboard engines, windshields? sort of wire harnesses, like where are you seeing the biggest improvement?
spk06: I'd say all of the above, but it's kind of two steps forward, one step back. We had significant improvement, and then we'll have issues getting outboard engines, for instance. So it's much, much better than it was the last few quarters, which is why we were able to complete and ship more boats than we manufactured. through the woods, but it's just sort of all over the place. So it's not just one thing. It's like a game of whack-a-mole. As soon as something sticks to you, the next thing pops up.
spk04: Yeah.
spk03: Yeah. Also, Fred does, Jim, transportation is better.
spk06: Yeah, that's a great point.
spk03: Yeah. Without exception, transportation is better. So that's helpful.
spk02: Great. Thanks a lot, guys. Thank you. Thanks, Fred. Thanks, Fred.
spk01: And there are no further questions at this time. I would like to turn the conference over to Jim Landers for closing remarks.
spk03: Okay. Thank you, Audra. And we appreciate everybody who called in on the questions. We hope everybody has a good day. We will talk to you soon.
spk01: And this concludes today's conference call. A replay of today's conference will be available on MarineProductsCorp.com within two hours following the completion of the call. Thank you for your participation. You may now disconnect.
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