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Item 2. Management’s Discussion and Analysis

2022-05-03 compared with 2022-02-01 · 62 added, 41 removed, 119 unchanged (46% of the section changed)

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In November 2021, we acquired Intrepid, a premier manufacturer of powerboats, and Texas MasterCraft, a premier watersports dealer in Northern Texas.

In April 2022, through Northrop & Johnson, we acquired Superyacht Management, S.A.R.L., better known as SYM, a superyacht management company based in Golfe Juan France.

MarineMax was incorporated in January 1998 (and reincorporated in Florida in March 2015).

We commenced operations with the acquisition of five independent recreational boat dealers on March 1, 1998.

Since the initial acquisitions in March 1998, we have acquired 32 recreational boat dealers, four boat brokerage operations, two full-service yacht repair operations, and two boat and yacht manufacturers.

Since the initial acquisitions in March 1998, we have acquired 32 recreational boat dealers, five boat brokerage operations, two full-service yacht repair operations, and two boat and yacht manufacturers.

As a part of our acquisition strategy, we frequently engage in discussions with various potential acquisition targets regarding their potential acquisition by us.

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As a result of these and other factors, a number of potential acquisitions that from time to time appear likely to occur do not result in binding legal agreements and are not consummated.

We completed three acquisitions in the fiscal year ending September 30, 2021 and two acquisitions to date in fiscal 2022.

We completed three acquisitions in the fiscal year ending September 30, 2021 and three acquisitions to date in fiscal 2022.

General economic conditions and consumer spending patterns can negatively impact our operating results.

Unfavorable local, regional, national or global economic developments or uncertainties regarding future economic prospects could reduce consumer spending in the markets we serve and adversely affect our business.

Economic conditions in areas in which we operate dealerships, particularly Florida in which we generated approximately 54% and 50% of our revenue during fiscal 2020 and 2021, respectively, can

have a major impact on our operations.

Unfavorable local, regional, national or global economic developments or uncertainties regarding future economic prospects could reduce consumer

spending in the markets we serve and adversely affect our business.

Economic conditions in areas in which we operate dealerships, particularly Florida in which we generated approximately 54% and 50% of our revenue during fiscal 2020 and 2021, respectively, can have a major impact on our operations.

Local influences, such as corporate downsizing, military base closings, and inclement weather such as hurricanes and other storms, environmental conditions, and specific events, such as the BP oil spill in the Gulf of Mexico in 2010, also could adversely affect, and in certain instances have adversely affected, our operations in certain markets.

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Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are favorable.

Additionally, any change by the Federal Reserve to raise its benchmark interest rate in the future or market expectations of such change may result in significantly higher long-term interest rates, which may negatively impact our customers’ willingness or desire to purchase our products.

As a result, an economic downturn could impact us more than certain of our competitors due to our strategic focus on a higher end of our market.

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Our ability to capture such market share supports the alignment of our retailing strategies with the desires of consumers.

We believe the steps we have taken to address weak market conditions in the past have yielded, and we believe will yield in the future, an increase in revenue.

We believe the steps we have taken to address weak market conditions in the past have yielded, and we believe are likely to yield in the future, an increase in revenue.

Acquisitions remain an important strategy for us, and, subject to a number of conditions, including macro-economic conditions and finding attractive acquisition targets, we plan to explore opportunities through this strategy.

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See Note 18 of the Notes to Unaudited Consolidated Financial Statements.

As of December 31, 2021, the Retail Operations segment includes the activity of 79 retail locations in Alabama, California, Connecticut, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Texas, Washington and Wisconsin, where we sell new and used recreational boats, including pleasure and fishing boats, with a focus on premium brands in each segment.

As of March 31, 2022, the Retail Operations segment includes the activity of 79 retail locations in Alabama, California, Connecticut, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Texas, Washington and Wisconsin, where we sell new and used recreational boats, including pleasure and fishing boats, with a focus on premium brands in each segment.

We also sell related marine products, including engines, trailers, parts, and accessories.

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Fraser Yachts Group and Northrop & Johnson, leading superyacht brokerage and luxury yacht services companies with operations in multiple countries, are also included in this segment.

As of December 31, 2021, the Product Manufacturing segment includes activity of Cruisers Yachts and Intrepid.

As of March 31, 2022, the Product Manufacturing segment includes activity of Cruisers Yachts and Intrepid.

Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufacturing sport yacht and yachts with sales through our select retail dealership locations and through independent dealers.

Cruisers Yachts is recognized as one of the world’s premier manufacturers of premium sport yacht and yachts, producing models from 33’ to 60’ feet.

Intrepid, also a wholly-owned MarineMax subsidiary, is recognized as a world class producer of customized boats, carefully reflecting the unique desires of each individual owner.

Intrepid, also a wholly-owned MarineMax subsidiary, is a producer of customized boats.

Intrepid follows a direct-to-consumer distribution model and has received many awards and accolades for its innovations and high-quality craftsmanship that create industry leading products in their categories.

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Consolidated Results of Operations

The following discussion compares the three months ended December 31, 2021, with the three months ended December 31, 2020 and should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements, including the related notes thereto, appearing elsewhere in this report.

Three Months Ended December 31, 2021 Compared with Three Months Ended December 31, 2020

Revenue increased $61.2 million, or 14.9%, to $472.7 million for the three months ended December 31, 2021, from $411.5 million for three months ended December 31, 2020.

Of this increase, $36.6 million was attributable to an 8.9% increase in comparable-store sales and a $24.6 million net increase was related to stores opened, including acquired, or closed that were not eligible for inclusion in the comparable-store base, as well as Intrepid and Cruisers Yachts manufacturing revenue which were not included in comparable retail store sales.

The following discussion compares the three and six months ended March 31, 2022, with the three and six months ended March 31, 2021 and should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements, including the related notes thereto, appearing elsewhere in this report.

Three Months Ended March 31, 2022 Compared with Three Months Ended March 31, 2021

Revenue increased $87.0 million, or 16.6%, to $610.1 million for the three months ended March 31, 2022, from $523.1 million for three months ended March 31, 2021.

Of this increase, $37.6 million was attributable to a 7.2% increase in comparable-store sales and a $49.4 million net increase was related to stores opened, including acquired, or closed that were not eligible for inclusion in the comparable-store base, as well as Intrepid and Cruisers Yachts manufacturing revenue which were not included in comparable retail store sales.

The increase in our comparable-store sales was primarily due to demand driven increases in new boat revenue and growth in our higher margin finance, insurance, brokerage, parts, service, storage services, and superyacht services revenue.

Gross Profit.

Gross profit increased $43.8 million, or 35.5%, to $167.2 million for the three months ended December 31, 2021, from $123.4 million for the three months ended December 31, 2020.

Gross profit as a percentage of revenue increased to 35.4% for the three months ended December 31, 2021 from 30.0% for the three months ended December 31, 2020 .

The increase in gross profit as a percentage of revenue was primarily the result of demand driven price increases resulting in greater boat margins and increases in our higher margin revenue as noted above, as a percentage of sales.

Gross profit increased $48.5 million, or 30.9%, to $205.3 million for the three months ended March 31, 2022, from $156.8 million for the three months ended March 31, 2021.

Gross profit as a percentage of revenue increased to 33.7% for the three months ended March 31, 2022, from 30.0% for the three months ended March 31, 2021 .

The increase in gross profit as a percentage of revenue was primarily the result of demand driven increases in boat margins and increases in our higher margin revenue as noted above, as a percentage of sales.

The increase in gross profit dollars was primarily attributable to increased new boat sales and our higher margin businesses.

Selling, General, and Administrative Expenses.

Selling, general, and administrative expenses increased $28.6 million, or 31.3%, to $120.0 million for the three months ended December 31, 2021, from $91.4 million for the three months ended December 31, 2020.

Selling, general, and administrative expenses increased as a percentage of revenue to 25.4% for the three months ended December 31, 2021 from 22.2% for the three months ended December 31, 2020.

The increase in selling, general, and administrative expenses was driven by an increase in mix to our higher margin businesses, which typically carry a higher expense structure, and acquisitions.

Selling, general, and administrative expenses increased $29.6 million, or 28.5%, to $133.5 million for the three months ended March 31, 2022, from $103.9 million for the three months ended March 31, 2021.

The increase in selling, general, and administrative expenses was driven by an increase in mix to our higher margin businesses, which typically carry a higher expense structure, increased gross profit which increased commissions, and acquisitions.

Interest Expense.

Interest expense decreased $0.7 million, or 53.8%, to $0.6 million for the three months ended December 31 , 2021, from $1.3 million for the three months ended December 31 , 2020.

Interest expense as a percentage of revenue decreased to 0.1% for the three months ended December 31 , 2021 from 0.3% for the three months ended December 31 , 2020.

Interest expense decreased $0.4 million, or 36.4%, to $0.7 million for the three months ended March 31 , 2022, from $1.1 million for the three months ended March 31 , 2021.

Interest expense as a percentage of revenue decreased to 0.1% for the three months ended March 31 , 2022, from 0.2% for the three months ended March 31 , 2021.

The decrease in interest expense was primarily the result of decreased borrowings.

Income Taxes.

Income tax expense increased $3.5 million, or 49.3%, to $10.6 million for the three months ended December 31, 2021, from $7.1 million for the three months ended December 31 , 2020.

Our effective income tax rate decreased to 22.8% for the three months ended December 31 , 2021, from 23.2% for three months ended December 31 , 2020.

The decrease in the effective income tax rate was primarily attributed to benefits from stock-based compensation.

Income tax expense increased $4.8 million, or 37.5%, to $17.6 million for the three months ended March 31, 2022, from $12.8 million for the three months ended March 31 , 2021.

Our effective income tax rate remained consistent at 24.8% for the three months ended March 31, 2022 and March 31, 2021.

Six Months Ended March 31, 2022 Compared with Six Months Ended March 31, 2021

Revenue increased $148.2 million, or 15.9%, to $1.083 billion for the six months ended March 31, 2022, from $934.6 million for six months ended March 31, 2021.

Of this increase, $74.2 million was attributable to a 7.9% increase in comparable-store sales and a $74.0 million net increase was related to stores opened, including acquired, or closed that were not eligible for inclusion in the comparable-store base, as well as Intrepid and Cruisers Yachts manufacturing revenue which were not included in comparable retail store sales.

Gross Profit.

Gross profit increased $92.3 million, or 32.9%, to $372.5 million for the six months ended March 31, 2022, from $280.2 million for the six months ended March 31, 2021.

Gross profit as a percentage of revenue increased to 34.4% for the six months ended March 31, 2022, from 30.0% for the six months ended March 31, 2021 .

The increase in gross profit dollars was primarily attributable to increased new boat sales and our higher margin businesses.

Selling, General, and Administrative Expenses.

Selling, general, and administrative expenses increased $58.1 million, or 29.7%, to $253.5 million for the six months ended March 31, 2022, from $195.4 million for the six months ended March 31, 2021.

Interest Expense.

Interest expense decreased $1.1 million, or 45.8%, to $1.3 million for the six months ended March 31 , 2022, from $2.4 million for the six months ended March 31 , 2021.

Interest expense as a percentage of revenue decreased to 0.1% for the six months ended March 31 , 2022, from 0.3% for the six months ended March 31 , 2021.

The decrease in interest expense was primarily the result of decreased borrowings.

Income Taxes.

Income tax expense increased $ 8.

2 million, or 41.

0 %, to $ 28.2 million for the six months ended March 31, 202 2 , from $ 20.0 million for the six months ended March 31 , 202 1 .

Our effective income tax rate decreased to 24.0 % for the six months ended March 31 , 202 2 , from 24.2 % for six months ended March 31 , 202 1 .

The decrease in the effective income tax rate was not significant .

Liquidity and Capital Resources

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However, we cannot predict the length of favorable economic or financial conditions.

We regularly monitor the aging of our inventories and current market trends to evaluate our current and future inventory needs.

We regularly monitor the aging of our inventories and current market trends (including supply chain issues) to evaluate our current and future inventory needs.

We also use this evaluation in conjunction with our review of our current and expected operating performance and expected business levels to determine the extent of our financing needs.

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Any turmoil in the credit markets and weakness in the retail markets may interfere with our ability to remain in compliance with the covenants of the Credit Facility and therefore our ability to utilize the Credit Facility to fund operations.

As of December 31, 2021, we were in compliance with all covenants under the Credit Facility.

As of March 31, 2022, we were in compliance with all covenants under the Credit Facility.

We currently depend upon dividends and other payments from our dealerships and the Credit Facility to fund our current operations and meet our cash needs.

As 100% owner of each of our dealerships, we determine the amounts of such distributions subject to applicable law, and currently, no agreements exist that restrict this flow of funds from our dealerships.

For the three months ended December 31, 2021, cash provided by operating activities was approximately $8.1 million.

For the three months ended December 31, 2020, cash used in operating activities was approximately $12.8 million.

For the three months ended December 31, 2021, cash provided by operating activities was primarily related to increases in contract liabilities (customer deposits), decreases in accounts receivable, and our net income adjusted for non-cash expenses such as depreciation and amortization expense and stock-based compensation expense, partially offset by increases in inventory and decreases in accrued expenses and other liabilities.

For the three months ended December 31, 2020, cash used in operating activities was primarily related to increases in inventory, decreases in accounts payable, and decreases in accrued expenses and other liabilities, partially offset by increases in contract liabilities (customer deposits), decrease in accounts receivable, and our net income adjusted for non-cash expenses such as depreciation and amortization expense, stock-based compensation expense, and deferred income tax provision.

For the three months ended December 31, 2021 and 2020, cash used in investing activities was approximately $92.6 million and $55.2 million, respectively.

For the three months ended December 31, 2021, cash used in investing activities was primarily used for acquisitions, to purchase property and equipment associated with improving existing retail facilities, to purchase property and equipment from locations formerly leased, and to purchase investments.

For the three months ended December 31, 2020, cash used in investing activities was primarily used for acquisitions and to purchase property and equipment associated with improving existing retail facilities.

For the three months ended December 31, 2021 and 2020, cash provided by financing activities was approximately $79.0 million and $33.1 million, respectively.

For the three months ended December 31, 2021, cash provided by financing activities was primarily attributable to net increases in short-term borrowings and net proceeds from issuance of common stock under incentive compensation and employee purchase plans, partially offset by payments on tax withholdings for equity awards and contingent acquisition consideration payments.

For the three months ended December 31, 2020, cash provided by financing activities was primarily attributable to proceeds from long-term debt and net proceeds from issuance of common stock under incentive compensation and employee purchase plans, partially offset by net decreases in short-term borrowings and payments on tax withholdings for equity awards.

For the six months ended March 31, 2022 and 2021, cash provided by operating activities was approximately $89.1 million and $146.6 million, respectively.

For the six months ended March 31, 2022, cash provided by operating activities was primarily related to increases in contract liabilities (customer deposits), increases in accrued expenses and other liabilities, increases in accounts payable, and our net income adjusted for non-cash expenses such as depreciation and amortization expense and stock-based compensation expense, partially offset by increases in inventory and increases in accounts receivable.

For the six months ended March 31, 2021, cash provided by operating activities was primarily related to decreases in inventory, increases in contract liabilities (customer deposits), increases in accrued expenses and other liabilities, and our net income adjusted for non-cash expenses such as depreciation and amortization expense, deferred income tax provision, and stock-based compensation expense, partially offset by increases in accounts receivable, increases in prepaid expenses and other assets, and decreases in accounts payable.

For the six months ended March 31, 2022 and 2021, cash used in investing activities was approximately $98.3 million and $64.3 million, respectively.

For the six months ended March 31, 2022, cash used in investing activities was primarily used for acquisitions, to purchase property and equipment associated with improving existing retail facilities, to purchase property and equipment from locations formerly leased, and to purchase investments, partially offset by proceeds from investments.

For the six months ended March 31, 2021, cash used in investing activities was primarily used for acquisitions, to purchase investments, and to purchase property and equipment associated with improving existing retail facilities .

For the six months ended March 31, 2022, cash provided by financing activities was approximately $7.1 million.

For the six months ended March 31, 2021, cash used in financing activities was approximately $95.1 million.

For the six months ended March 31, 2022, cash provided by financing activities was primarily attributable to net increases in short-term borrowings and net proceeds from issuance of common stock under incentive compensation and employee purchase plans, partially offset by purchase of treasury stock, payments on tax withholdings for equity awards, and contingent acquisition consideration payments.

For the six months ended March 31, 2021, cash used in financing activities was primarily attributable to net payments on short-term borrowings, payments on tax withholdings for equity awards, and payments for long-term debt, partially offset by proceeds from long-term debt and net proceeds from issuance of common stock under incentive compensation and employee purchase plans .

In May 2020, we entered into a Loan and Security Agreement, which was subsequently amended in July 2021, with Wells Fargo Commercial Distribution Finance LLC, M&T Bank, Bank of the West, and Truist Bank.

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There is an unused line fee of ten basis points on the unused portion of the Credit Facility.

As of December 31, 2021, we were in compliance with all covenants under the Credit Facility.

As of March 31, 2022, we were in compliance with all covenants under the Credit Facility.

Advances under the Credit Facility are initiated by the acquisition of eligible new and used inventory or are re-advances against eligible new and used inventory that have been partially paid-off.

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None of our real estate has been pledged for collateral for the Credit Facility.

As of December 31, 2021, our indebtedness associated with our short-term borrowings and our long-term debt totaled approximately $113.7 million and $50.8 million, respectively.

As of December 31, 2021, short-term borrowings and long-term debt recorded on the Unaudited Condensed Consolidated Balance Sheets included unamortized debt issuance costs of approximately $0.2 million and $0.6 million, respectively.

As of March 31, 2022, our indebtedness associated with our short-term borrowings and our long-term debt totaled approximately $59.1 million and $49.9 million, respectively.

As of March 31, 2022, short-term borrowings and long-term debt recorded on the Unaudited Condensed Consolidated Balance Sheets included unamortized debt issuance costs of approximately $0.2 million and $0.6 million, respectively.

Refer to Note 11 of the Notes to Unaudited Condensed Consolidated Financial Statements for disclosure of borrowing availability, interest rates, and terms of our short-term borrowings and long-term debt.

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For example, prolonged winter conditions, drought conditions (or merely reduced rainfall levels) or excessive rain, may limit access to area boating locations or render boating dangerous or inconvenient, thereby curtailing customer demand for our products.

In addition, unseasonably cool

weather and prolonged winter conditions may lead to a shorter selling season in certain locations.

In addition, unseasonably cool weather and prolonged winter conditions may lead to a shorter selling season in certain locations.

Hurricanes and other storms could result in disruptions of our operations or damage to our boat inventories and facilities, as has been the case when Florida and other markets were affected by hurricanes, such as Hurricanes Harvey and Irma in 2017.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis