CorMedix Q1 2023 Earnings Call Transcript

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April 26, 2023

There are 6 speakers on the call.

Operator

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 At this time, all participants are in listen only mode. Following the presentation, we will conduct a question and answer session. I would like to advise everyone that this conference call is being recorded.

Operator

Jim will get us started by reading the forward looking disclaimer.

Speaker 1

Thank you, Agra, 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, reflect a number of known and unknown risks. I'd like to refer you to our press release issued today, our 2022 Form 10 ks 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.

Speaker 1

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. We're also required to use EBITDA to report compliance with financial covenants under our credit facility. Our press release issued this morning and our website 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.

Speaker 2

Thanks, Jim, and thank you all for joining our call this morning. I will begin with a few highlights regarding our Q1 of 2023 earnings press release that was issued this morning. Green Products Corporation once again generated record net sales during the Q1 as we experienced improvement in our We completed those in our inventory and delivered them to our dealers. Average selling prices increased primarily due to a favorable model mix with both Chaparral and Robala. In 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.

Speaker 2

Dealer inventories are trending towards more normalized levels. However, inventory remains below pre pandemic levels. We also announced this morning that our Board of Directors

Speaker 3

Thanks, Ben. I'll begin with an overview of the company's Q1 2023 financial results. Net sales for the Q1 of 2023 were a record $118,900,000 a 55% increase Compared to the Q1 of last year, unit sales increased by 40% and 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 Gross profit in the Q1 of 2023 was $29,000,000 a 58% increase compared to the Q1 of last year. Gross margin for the Q1 of 2023 was 24.4%, a slight improvement over the 24.0% for the Q1 of 2022 as we saw some benefits from manufacturing efficiencies.

Speaker 3

Selling, general and administrative expenses for the Q1 of 2023 were $14,500,000 an increase of 57% compared to $9,200,000 in the Q1 of last year. This increase is due to costs that typically increase with higher sales and profitability, such as incentive compensation, sales commissions and warranty expenses. These Q1 of 2023 expenses also included a non cash pension settlement charge of $2,100,000 Selling, general and administrative expenses were 12% of net sales In the Q1 of both years, but they were 10% of net sales in the Q1 of this year excluding that non cash pension settlement charge. As we complete the final termination of our pension plan, which is expected in the Q2, we do not expect to make any cash contributions EBITDA in the Q1 of 2023 was $15,000,000 an increase of $5,400,000 or 56% compared to the Q1 of last year. We reported a record quarterly net income Of $11,500,000 in the Q1 of this year, a 64% increase compared to $7,100,000 in the same quarter of last year.

Speaker 3

Diluted earnings per share were $0.34 in the first quarter of this year compared to $0.21 in the Q1 of last year. Our international sales, which account for approximately 7% of our total sales increased by 89% compared to last year. Our cash balance at the end of the Q1 of 'twenty three was $62,600,000 a $19,400,000 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 during the quarter. Dealer inventories are increasing More normalized levels, but continue to be lower than pre pandemic levels. These moderately higher inventories will benefit our dealers The outcome of the winter boat shows was generally favorable And our dealers continue to request both they have already sold to retail customers as well as additional inventory for the upcoming selling season.

Speaker 3

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

Speaker 2

few closing remarks. Thanks, Mike. Our market share remains strong. Chaparral Stern Drive market share remains number 2 in its size category. The combination of Chaparral and Robalo's outboard sell the 3rd highest market share in their size category.

Speaker 2

Our successive quarters of record sales The result of the hard work of the Chaparral RevPAR 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.

Speaker 3

Thank you.

Operator

We'll go first to Craig Kennison at Baird.

Speaker 4

Thanks and good morning everybody. And congratulations on the progress on your pension as well. My question was Just the availability of credit, I'm wondering if there's been any change in credit availability in the wake of the recent

Speaker 3

Bank collapses. Craig, this is Ben.

Speaker 2

We certainly the credit line providers to the dealers have I would describe it as they have not been proactive in increasing the lines, but we've been successful in coordinating with them, The service line providers to increase them as appropriate. We have not heard if there's any particular references or delays in increase in 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.

Speaker 4

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?

Speaker 2

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 for 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.

Speaker 3

Perfect.

Speaker 4

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 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 are boat prices Oil prices look like in some of your models, are you seeing inflation, I guess, Fade a little bit from a consumer perspective.

Speaker 2

I would say again, This is Ben. The higher rates, we are incurring slightly higher dealer incentives because of the Program that we have in place where we share or we'll pay for a period of time some of the interest. So That is an impact between us and they haven't impacted us yet, but it's impacting our margins. That's something that we're helping the dealers with respect to Rebuilding our inventories, but

Speaker 3

Not really. Do you have any other questions? 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 Those are cleared up. Some of those are the rate of inflation there for our manufacturing has slowed.

Speaker 3

And so that's 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 as Ben mentioned, At the same time, we're seeing incentives 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 has passed along costs. So as our costs normalize, I think the cost and rate of increase So it's for the end customer, we'll normalize also.

Speaker 2

Yes, we're seeing on kind of the material side, we've seen some Reduction in some of the costs, some of the manufacturing components are coming down as much. We're certainly nearly as fast. So ultimately, as Mike said, that hopefully there won't be a need for large increases going forward. 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 expect that there will be some moderation, there will be some more normalized discounting by dealers as we move forward.

Speaker 2

I would That will normalize. I think in the same way, yield inventory will normalize.

Speaker 4

That's great. Thank you so much.

Speaker 3

Thanks, Greg. Thank you.

Operator

We'll go next to Fred Wightman at Wolfe.

Speaker 5

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?

Speaker 1

Yes. Hey, Fred, this is Jim. Yes, 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 Chaparrales and Embalas than in the previous year.

Speaker 1

So those are very strong, plus a lot of follow-up as you know.

Speaker 2

There are a lot of sales that

Speaker 1

are sort of Initiated at both 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 delaying the impulse buyer coming in. But Yes, the boat show season was generally favorable.

Speaker 1

We'll repeat that language. And there was no Geographic or demographic kind of trends in

Speaker 2

the period? Geographic, I think that's right. 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 large.

Speaker 3

Yes. We attended a few of them, like Jim and I went to Miami and you wanted to talk to me, you know, like slowdown is

Speaker 1

So I think people were

Speaker 3

at that show and we and follow-up through our numbers too. We all have spoke really well there. Same story here in Atlanta, the low show here was pretty successful. Course, there's 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. So but I'd say the bigger ones, at least the ones that we attended in

Speaker 2

this room

Speaker 3

seemed Great. So, yes, mix like Tim said. Yes.

Speaker 5

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?

Speaker 2

I think that from the dealer's perspective, I'm just looking globally at their current Orders in hand and their expectations for the spring, we have little to no Pushback on the folks that we plan to ship to the dealers, right? When we're talking to the dealers about What's going to be available in the coming weeks, we've had little to no, what we would call it, cancellations or deferrals on those. They're So willing to accept as many votes as we can reasonably ship to them. So I think that bodes well overall Across our dealership that they the current demand seems to be good enough and they have enough confidence at this point in time Our field inventory has It's up, but it's probably only half to 2 thirds as large as it was kind of 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.

Speaker 2

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 Yes, into the end of the year. So we're still we still are very positive on

Speaker 3

the rest of the year. But as

Speaker 2

we mentioned in our comments, we're certainly 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

Speaker 5

Great. And then just the last one, you guys mentioned some improvement in Supply chain and improved component availability, like where are the specific items that you're seeing some relief? Is it on outboard engines, windshields, So why are harnesses? Like where are you seeing the biggest improvement?

Speaker 3

I'd say all of the above, but it's Kind of 2 steps forward, 1 step back. We had significant improvement and then we'll have issues getting This is Brent. But then the slide shows 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, but it's still we're still not 100% 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 pops up.

Speaker 1

Yes. Also Fred, it's Jim. Transportation is better. Yes. That's a great point.

Speaker 1

Yes. Without exception, transportation is better. That's helpful.

Speaker 5

Great. Thanks a lot guys.

Speaker 3

Thank you. Thanks, Brett. Thanks, Brett.

Operator

And there are no further questions

Speaker 2

at this time. I would like to turn the conference

Operator

over to Jim Landers for closing remarks. Over to Jim Landers for closing remarks.

Speaker 1

Okay. Thank you, Audra, and we appreciate everybody who called in on the questions. We

Operator

Conference Call. A replay of today's conference will be available on marineproductscorp.com within 2 hours following the completion of the call. Thank you for your participation. You may now disconnect.

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Earnings Conference Call
CorMedix Q1 2023
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