MARINEMAX INC 10-Q

ITEM 1. Financial Statements MARINEMAX, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Amounts in thousands, except share and per share data) (Unaudited) Three Months Ended Six Months Ended March 31, March 31, 2021 2022 2021 2022 Revenue $ 523,095 $ 610,106 $ 934,618 $ 1,082,797 Cost of sales 366,289 404,791 654,411 710,283 Gross profit 156,806 205,315 280,207 372,514 Selling, general, and administrative expenses 103,936 133,532 195,354 253,529 Income from operations 52,870 71,783 84,853 118,985 Interest expense 1,092 654 2,360 1,291 Income before income tax provision 51,778 71,129 82,493 117,694 Income tax provision 12,843 17,622 19,958 28,244 Net income $ 38,935 $ 53,507 $ 62,535 $ 89,450 Basic net income per common share $ 1.76 $ 2.45 $ 2.83 $ 4.09 Diluted net income per common share $ 1.69 $ 2.37 $ 2.73 $ 3.96 Weighted average number of common shares used in computing net income per common share: Basic 22,143,043 21,861,438 22,083,827 21,880,558 Diluted 22,986,061 22,530,102 22,864,950 22,597,105 See accompanying Notes to Condensed Consolidated Financial Statements. 3 MARINEMAX, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Income (Amounts in thousands) (Unaudited) Three Months Ended Six Months Ended March 31, March 31, 2021 2022 2021 2022 Net income $ 38,935 $ 53,507 $ 62,535 $ 89,450 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments ( 1,032 ) ( 547 ) 83 ( 1,036 ) Interest rate swap contract 388 442 193 535 Total other comprehensive (loss) income, net of tax ( 644 ) ( 105 ) 276 ( 501 ) Comprehensive income $ 38,291 $ 53,402 $ 62,811 $ 88,949 See accompanying Notes to Condensed Consolidated Financial Statements. 4 MARINEMAX, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Amounts in thousands, except share data) (Unaudited) September 30, March 31, 2021 2022 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 222,192 $ 219,400 Accounts receivable, net 47,651 62,276 Inventories, net 230,984 329,731 Prepaid expenses and other current assets 16,692 17,596 Total current assets 517,519 629,003 Property and equipment, net of accumulated depreciation of $ 97,814 and $ 106,885 175,463 220,569 Operating lease right-of-use assets, net 104,901 100,818 Goodwill and other intangible assets, net 201,122 246,265 Other long-term assets 8,818 9,069 Total assets $ 1,007,823 $ 1,205,724 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 25,739 $ 37,856 Contract liabilities (customer deposits) 100,660 164,068 Accrued expenses 86,594 95,750 Short-term borrowings 23,943 58,858 Current maturities on long-term debt 3,587 3,587 Current operating lease liabilities 10,570 9,774 Total current liabilities 251,093 369,893 Long-term debt, net of current maturities 47,498 45,747 Noncurrent operating lease liabilities 96,956 93,885 Deferred tax liabilities, net 9,268 14,646 Other long-term liabilities 8,116 7,293 Total liabilities 412,931 531,464 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY: Preferred stock, $ .001 par value, 1,000,000 shares authorized, none issued or outstanding as of September 30, 2021 and March 31, 2022 — — Common stock, $ .001 par value, 40,000,000 shares authorized, 28,588,863 and 28,756,404 shares issued and 21,821,842 and 21,616,462 shares outstanding as of September 30, 2021 and March 31, 2022, respectively 29 29 Additional paid-in capital 288,901 295,589 Accumulated other comprehensive income 648 147 Retained earnings 432,678 522,128 Treasury stock, at cost, 6,767,021 and 7,139,942 shares held as of September 30, 2021 and March 31, 2022, respectively ( 127,364 ) ( 143,633 ) Total shareholders’ equity 594,892 674,260 Total liabilities and shareholders’ equity $ 1,007,823 $ 1,205,724 See accompanying Notes to Condensed Consolidated Financial Statements. 5 MARINEMAX, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Shareholders’ Equity (Amounts in thousands, except share data) (Unaudited) Additional Accumulated Other Total Common Stock Paid-in Comprehensive Retained Treasury Shareholders’ Shares Amount Capital Income Earnings Stock Equity BALANCE, September 30, 2021 28,588,863 $ 29 $ 288,901 $ 648 $ 432,678 $ ( 127,364 ) $ 594,892 Net income — — — — 35,943 — 35,943 Shares issued pursuant to employee stock purchase plan 22,399 — 924 — — — 924 Shares issued upon vesting of equity awards, net of minimum tax withholding 111,011 — ( 1,429 ) — — — ( 1,429 ) Shares issued upon exercise of stock options 21,000 — 155 — — — 155 Stock-based compensation 684 — 3,263 — — — 3,263 Other comprehensive loss — — — ( 396 ) — — ( 396 ) BALANCE, December 31, 2021 28,743,957 $ 29 $ 291,814 $ 252 $ 468,621 $ ( 127,364 ) $ 633,352 Net income — — — — 53,507 — 53,507 Purchase of treasury stock — — — — — ( 16,269 ) ( 16,269 ) Shares issued upon vesting of equity awards, net of minimum tax withholding 10,188 — ( 161 ) — — — ( 161 ) Shares issued upon exercise of stock options 1,500 — 24 — — — 24 Stock-based compensation 759 — 3,912 — — — 3,912 Other comprehensive loss — — — ( 105 ) — — ( 105 ) BALANCE, March 31, 2022 28,756,404 $ 29 $ 295,589 $ 147 $ 522,128 $ ( 143,633 ) $ 674,260 Additional Accumulated Other Total Common Stock Paid-in Comprehensive Retained Treasury Shareholders’ Shares Amount Capital Income Earnings Stock Equity BALANCE, September 30, 2020 28,130,312 $ 28 $ 280,436 $ 829 $ 277,699 $ ( 103,595 ) $ 455,397 Net income — — — — 23,600 — 23,600 Shares issued pursuant to employee stock purchase plan 83,572 — 740 — — — 740 Shares issued upon vesting of equity awards, net of minimum tax withholding 121,303 — ( 871 ) — — — ( 871 ) Shares issued upon exercise of stock options 56,746 — 783 — — — 783 Stock-based compensation 1,777 — 2,013 — — — 2,013 Other comprehensive income — — — 920 — — 920 BALANCE, December 31, 2020 28,393,710 $ 28 $ 283,101 $ 1,749 $ 301,299 $ ( 103,595 ) $ 482,582 Net income — — — — 38,935 — 38,935 Shares issued upon vesting of equity awards, net of minimum tax withholding 9,899 — ( 154 ) — — — ( 154 ) Shares issued upon exercise of stock options 15,333 — 186 — — — 186 Stock-based compensation 1,597 — 2,399 — — — 2,399 Other comprehensive loss — — — ( 644 ) — — ( 644 ) BALANCE, March 31, 2021 28,420,539 $ 28 $ 285,532 $ 1,105 $ 340,234 $ ( 103,595 ) $ 523,304 See accompanying Notes to Condensed Consolidated Financial Statements 6 MARINEMAX, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Amounts in thousands) (Unaudited) Six Months Ended March 31, 2021 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 62,535 $ 89,450 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,481 9,304 Deferred income tax provision 1,992 1,394 Loss (gain) on sale of property and equipment 64 ( 103 ) Proceeds from insurance settlements 941 — Stock-based compensation expense 4,412 7,175 (Increase) decrease in, net of effects of acquisitions — Accounts receivable, net ( 10,079 ) ( 12,122 ) Inventories, net 37,312 ( 73,843 ) Prepaid expenses and other assets ( 1,848 ) ( 678 ) (Decrease) increase in, net of effects of acquisitions — Accounts payable ( 15,563 ) 10,494 Contract liabilities (customer deposits) 44,003 46,094 Accrued expenses and other liabilities 15,390 11,931 Net cash provided by operating activities 146,640 89,096 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 12,127 ) ( 31,893 ) Cash used in acquisition of businesses, net of cash acquired ( 50,261 ) ( 67,165 ) Proceeds from investments — 2,250 Purchases of investments ( 2,250 ) ( 1,750 ) Proceeds from insurance settlements 213 — Proceeds from sale of property and equipment 165 216 Net cash used in investing activities ( 64,260 ) ( 98,342 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net (payments) borrowings on short-term borrowings ( 139,125 ) 31,485 Proceeds from long-term debt 46,375 — Payments for long-term debt ( 965 ) ( 1,751 ) Payments for debt issuance costs ( 910 ) — Contingent acquisition consideration payments — ( 3,000 ) Purchase of treasury stock — ( 16,269 ) Net proceeds from issuance of common stock under incentive compensation and employee purchase plans 1,709 1,103 Payments on tax withholdings for equity awards ( 2,178 ) ( 4,457 ) Net cash (used in) provided by financing activities ( 95,094 ) 7,111 Effect of exchange rate changes on cash 109 ( 657 ) NET DECREASE IN CASH AND CASH EQUIVALENTS ( 12,605 ) ( 2,792 ) CASH AND CASH EQUIVALENTS, beginning of period 155,493 222,192 CASH AND CASH EQUIVALENTS, end of period $ 142,888 $ 219,400 Supplemental disclosures of cash flow information: Cash paid for: Interest $ 2,083 $ 642 Income taxes 17,328 19,388 Non-cash items: Contingent consideration liabilities from acquisitions 8,200 6,030 See accompanying Notes to Condensed Consolidated Financial Statements. 7 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. COMPANY BACKGROUND: We believe we are the largest recreational boat and yacht retailer and superyacht services company in the world. We engage primarily in the retail sale, brokerage, and service of new and used boats, motors, trailers, marine parts and accessories and offer slip and storage accommodations in certain locations. In addition, we arrange related boat financing, insurance, and extended service contracts. We also offer the charter of power yachts in the British Virgin Islands. As of March 31, 2022, we operated through 79 retail locations in 21 states, consisting of 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. Our MarineMax Vacations operation maintains a facility in Tortola, British Virgin Islands. We also own Fraser Yachts Group and Northrop & Johnson, leading superyacht brokerage and luxury yacht services companies with operations in multiple countries. Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufactures sport yacht and yachts with sales through our select retail dealership locations and through independent dealers . Intrepid Powerboats (“Intrepid”) is a producer of customized boats. We are the largest retailer of Sea Ray and Boston Whaler recreational boats which are manufactured by Brunswick Corporation (“Brunswick”). Sales of new Brunswick boats accounted for approximately 27 % of our revenue in fiscal 2021. Sales of new Sea Ray and Boston Whaler boats, both divisions of Brunswick, accounted for approximately 11 % and 13 %, respectively, of our revenue in fiscal 2021. Brunswick is a world leading manufacturer of marine products and marine engines. We have dealership agreements with Sea Ray, Boston Whaler, Harris, and Mercury Marine, all subsidiaries or divisions of Brunswick. We also have dealer agreements with Italy-based Azimut-Benetti Group’s product line for Azimut and Benetti yachts and mega yachts. These agreements allow us to purchase, stock, sell, and service these manufacturers’ boats and products. These agreements also allow us to use these manufacturers’ names, trade symbols, and intellectual properties in our operations. The agreements for Sea Ray and Boston Whaler products, respectively, appoint us as the exclusive dealer of Sea Ray and Boston Whaler boats, respectively, in our geographic markets. In addition, we are the exclusive dealer for Azimut Yachts for the entire United States. Sales of new Azimut yachts accounted for approximately 10 % of our revenue in fiscal 2021. We believe non-Brunswick brands offer a migration for our existing customer base or fill a void in our product offerings, and accordingly, do not compete with the business generated from our other prominent brands. In November 2021, we acquired Intrepid, a premier manufacturer of powerboats, and Texas Marine Holdings (“Texas MasterCraft”), a premier watersports dealer in Northern Texas. Intrepid is a producer of customized boats. Texas MasterCraft specializes in ski and wakeboard boats. The activity of Intrepid is included in our Product Manufacturing segment. The activity of Texas MasterCraft is included in our Retail Operations segment. From March 2020 through June 2020, we temporarily closed certain departments or locations based on guidance from local government or health officials as a result of the COVID-19 pandemic. We are following guidelines to ensure we are safely operating as recommended. As the COVID-19 pandemic is complex and evolving rapidly with many unknowns, the Company will continue to monitor ongoing developments and respond accordingly. Management expects its business, across all of its geographies, will be impacted to some degree, but the significance of the impact of the COVID-19 pandemic on the Company’s business and the duration for which it may have an impact cannot be determined at this time. As is typical in the industry, we deal with most of our manufacturers, other than Sea Ray, Boston Whaler, and Azimut Yachts, under renewable annual dealer agreements, each of which gives us the right to sell various makes and models of boats within a given geographic region. Any change or termination of these agreements, or the agreements discussed above, for any reason, or changes in competitive, regulatory or marketing practices, including rebate or incentive programs, could adversely affect our results of operations. Although there are a limited number of manufacturers of the type of boats and products that we sell, we believe that adequate alternative sources would be available to replace any manufacturer other than Sea Ray, Boston Whaler, and Azimut as a product source. These alternative sources may not be available at the time of any interruption, and alternative products may not be available at comparable terms, which could affect operating results adversely. 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. Local influences, such as corporate downsizing, military base closings, 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. 8 In an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of luxury goods. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are favorable. As a result, an economic downturn would likely impact us more than certain of our competitors due to our strategic focus on a higher end of our market. Although we have expanded our operations during periods of stagnant or modestly declining industry trends, the cyclical nature of the recreational boating industry or the lack of industry growth may adversely affect our business, financial condition, and results of operations. Any period of adverse economic conditions or low consumer confidence is likely to have a negative effect on our business. Historically, in periods of lower consumer spending and depressed economic conditions, we have, among other things, substantially reduced our acquisition program, delayed new store openings, reduced our inventory purchases, engaged in inventory reduction efforts, closed a number of our retail locations, reduced our headcount, and amended and replaced our credit facility. 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 continue to explore opportunities through this strategy . 2. BASIS OF PRESENTATION: These Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information, the instructions to Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X and should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. Accordingly, these Unaudited Condensed Consolidated Financial Statements do not include all of the information and footnote disclosures required by accounting principles generally accepted in the United States for complete financial statements. All adjustments, consisting of only normal recurring adjustments considered necessary for fair presentation, have been reflected in these Unaudited Condensed Consolidated Financial Statements. The operating results for the six months ended March 31, 2022, are not necessarily indicative of the results that may be expected in future periods. The preparation of Unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Unaudited Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates made by us in the accompanying Unaudited Condensed Consolidated Financial Statements include valuation allowances, valuation of goodwill and intangible assets, and valuation of long-lived assets. Actual results could differ from those estimates. Effective May 2, 2021, our reportable segments changed as a result of the Company’s acquisition of Cruisers Yachts, which changed management’s reporting structure and operating activities. We now report our operations through two new reportable segments: Retail Operations and Product Manufacturing. The change in reportable segments had no impact on the Company’s previously reported historical consolidated financial statements. Where applicable, all prior periods presented have been revised to conform to the change in reportable segments. See Note 18. All references to the “Company,” “our company,” “we,” “us,” and “our” mean, as a combined company, MarineMax, Inc. and the 32 recreational boat dealers, four boat brokerage operations, two full-service yacht repair operations, and two manufacturers acquired as of March 31, 2022 (the “acquired dealers,” and together with the brokerage and repair operations, “operating subsidiaries” or the “acquired companies”). The Unaudited Condensed Consolidated Financial Statements include our accounts and the accounts of our subsidiaries, all of which are wholly owned. All significant intercompany transactions and accounts have been eliminated. 9 3. NEW ACCOUNTING PRONOUNCEMENTS: In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which requires contract assets and contract liabilities (i.e., unearned revenue) acquired in a business combination to be recognized and measured in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. This guidance is effective for interim and annual periods beginning after December 15, 2022. We are currently evaluating the impact that this standard will have on our consolidated financial statements. 4. FAIR VALUE MEASUREMENTS: The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. Level 2 - Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. Level 3 - Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. The following tables summarize the Company’s financial assets and liabilities measured at fair value in the accompanying Unaudited Condensed Consolidated Balance Sheets: March 31, 2022 Level 1 Level 2 Level 3 Total (Amounts in thousands) Assets: Interest rate swap contract $ — $ 864 $ — $ 864 Liabilities: Contingent consideration liabilities $ — $ — $ 15,629 $ 15,629 September 30, 2021 Level 1 Level 2 Level 3 Total (Amounts in thousands) Assets: Interest rate swap contract $ — $ 150 $ — $ 150 Liabilities: Contingent consideration liabilities $ — $ — $ 12,364 $ 12,364 There were no transfers between the valuation hierarchy Levels 1, 2, and 3 for the six months ended March 31, 2021 and 2022. The fair value of the Company’s interest rate swap contract is calculated as the present value of expected future cash flows, determined on the basis of forward interest rates and present value factors. The inputs to the fair value measurements reflect Level 2 inputs. The interest rate swap contract balance is included in other long-term assets in the accompanying Unaudited Condensed Consolidated Balance Sheets. The interest rate swap contract is designated as a cash flow hedge with changes in fair value reported in other comprehensive income in the accompanying Unaudited Condensed Consolidated Statements of Comprehensive Income. 10 We estimate the fair value of our contingent consideration liabilities using a probability-weighted discounted cash flow model. The contingent consideration liabilities are estimated based on forecasted pre-tax earnings as a base scenario (among other assumptions) subject to a Monte Carlo simulation. The fair value of the contingent consideration liabilities, which reflect Level 3 inputs, is reassessed on a quarterly basis. The contingent consideration liabilities balance is included in accrued expenses and other long-term liabilities in the accompanying Unaudited Condensed Consolidated Balance Sheets. Changes in fair value and net present value of the contingent consideration liabilities are included in selling, general, and administrative expenses in the accompanying Unaudited Condensed Consolidated Statements of Operations. The following tables set forth the changes in fair value of our contingent consideration liabilities, which reflect Level 3 inputs, for the six months ended March 31, 2021 and 2022: Contingent Consideration Liabilities (Amounts in thousands) Beginning balance - September 30, 2021 $ 12,364 Additions from business acquisitions 6,030 Settlement of contingent consideration liabilities ( 3,000 ) Change in fair value and net present value of contingency 235 Ending balance - March 31, 2022 $ 15,629 Contingent Consideration Liabilities (Amounts in thousands) Beginning balance - September 30, 2020 $ 2,960 Additions from business acquisitions 8,200 Settlement of contingent consideration liabilities — Change in fair value and net present value of contingency 232 Ending balance - March 31, 2021 $ 11,392 We determined that the carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, short-term borrowings, and the revolving mortgage facility approximate their fair values because of the nature of their terms and current market rates of these instruments. The fair value of our mortgage facilities, which are not carried at fair value in the accompanying Unaudited Condensed Consolidated Balance Sheets, was determined using Level 2 inputs based on the discounted cash flow method. We estimate the fair value of our mortgage facilities using a present value technique based on current market interest rates for similar types of financial instruments that reflect Level 2 inputs. The following table summarizes the carrying value and fair value of our mortgage facilities as of September 30, 2021 and March 31, 2022: September 30, 2021 March 31, 2022 Fair Value Carrying Value Fair Value Carrying Value (Amounts in thousands) Mortgage facility payable to Flagship Bank $ 6,872 $ 6,899 $ 6,393 $ 6,652 Mortgage facility payable to Seacoast National Bank 17,529 17,675 16,407 17,086 Mortgage facility payable to Hancock Whitney Bank 27,089 27,106 25,193 26,149 5 . REVENUE RECOGNITION: The majority of our revenue is from contracts with customers for the sale of boats, motors, and trailers. We recognize revenue from boat, motor, and trailer sales upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance of the boat, motor, and trailer by the customer and the satisfaction of our performance obligations. The transaction price is determined with the customer at the time of sale. Customers may trade in a used boat to apply toward the purchase of a new or used boat. The trade-in is a type of noncash consideration measured at fair value, based on external and internal observable and unobservable market data and applied as payment to the contract price for the purchased boat. At the time of acceptance, the customer is able to direct the use of, and obtain substantially all of, the benefits of the boat, motor, or trailer. We recognize commissions earned from a brokerage sale when the related brokerage transaction closes upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance by the customer. 11 We do not directly finance our customers’ boat, motor, or trailer purchases. In many cases, we assist with third-party financing for boat, motor, and trailer sales. We recognize commissions earned by us for placing notes with financial institutions in connection with customer boat financing when we recognize the related boat sales. Pursuant to negotiated agreements with financial institutions, we are charged back for a portion of these fees should the customer terminate or default on the related finance contract before it is outstanding for a stipulated minimum period of time. We base the chargeback allowance, which was not material to the U naudited C ondensed C onsolidated F inancial S tatements taken as a whole as of March 31, 202 2 , on our experience with repayments or defaults on the related finance contracts. We recognize variable consideration from commissions earned on extended warranty service contracts sold on behalf of third-party insurance companies at generally the later of customer acceptance of the service contract terms as evidenced by contract execution or recognition of the related boat sale. We also recognize variable consideration from marketing fees earned on insurance products sold by third-party insurance companies at the later of customer acceptance of the insurance product as evidenced by contract execution or when the related boat sale is recognized. We recognize revenue from parts and service operations (boat maintenance and repairs) over time as services are performed. Each boat maintenance and repair service is a single performance obligation that includes both the parts and labor associated with the service. Payment for boat maintenance and repairs is typically due upon the completion of the service, which is generally completed within a short period of time from contract inception. We satisfy our performance obligations, transfer control, and recognize revenue over time for parts and service operations because we are creating a contract asset with no alternative use and we have an enforceable right to payment for performance completed to date. Contract assets primarily relate to our right to consideration for work in process not yet billed at the reporting date associated with maintenance and repair services. We use an input method to recognize revenue and measure progress based on labor hours expended to satisfy the performance obligation at average labor rates. We have determined labor hours expended to be the relevant measure of work performed to complete the maintenance and repair service for the customer. As a practical expedient, because repair and maintenance service contracts have an original duration of one year or less, we do not consider the time value of money, and we do not disclose estimated revenue expected to be recognized in the future for performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period or when we expect to recognize such revenue. Contract assets, recorded in prepaid expenses and other current assets, totaled approximately $ 5.7 million and $ 6.3 million as of September 30, 2021 and March 31, 2022, respectively. We recognize revenue from the sale of our manufactured yachts when control of the yacht is transferred to the dealer, which is generally upon acceptance by the dealer. At the time of acceptance, the dealer is able to direct the use of, and obtain substantially all of the benefits of, the yacht. We have elected to record shipping and handling activities that occur after the dealer has obtained control of the yacht as a fulfillment activity. Contract liabilities primarily consist of customer deposits. We recognize contract liabilities (customer deposits) as revenue at the time of acceptance and the transfer of control to the customers. We recognize deferred revenue from service operations and slip and storage services over time on a straight-line basis over the term of the contract as our performance obligations are met. We recognize income from the rentals of chartering power yachts over time on a straight-line basis over the term of the contract as our performance obligations are met. The following table sets forth percentages on the timing of revenue recognition for the three and six months ended March 31, Retail Operations Product Manufacturing Three Months Ended Three Months Ended March 31, March 31, 2021 2022 2021 2022 Goods and services transferred at a point in time 93.1 % 92.2 % — 100.0 % Goods and services transferred over time 6.9 % 7.8 % — — Revenue 100.0 % 100.0 % — 100.0 % Retail Operations Product Manufacturing Six Months Ended Six Months Ended March 31, March 31, 2021 2022 2021 2022 Goods and services transferred at a point in time 92.0 % 91.0 % — 100.0 % Goods and services transferred over time 8.0 % 9.0 % — — Revenue 100.0 % 100.0 % — 100.0 % 12 6 . LEASES: Substantially all of the leases that we enter into are real estate leases. We lease numerous facilities relating to our operations, including showrooms, display lots, marinas, service facilities, slips, offices, equipment and our corporate headquarters. Leases for real property have terms, including renewal options, ranging from one to in excess of twenty-five years . In addition, we lease certain charter boats for our yacht charter business. As of March 31, 2022, the weighted-average remaining lease term for our leases was approximately 12 years . All of our leases are classified as operating leases, which are included as ROU assets and operating lease liabilities in the accompanying Unaudited Condensed Consolidated Balance Sheets. For the three months ended March 31, 2021 and 2022, operating lease expenses recorded in selling, general, and administrative expenses were approximately $ 6.4 million and $ 5.8 million, respectively. For the six months ended March 31, 2021 and 2022, operating lease expenses recorded in selling, general, and administrative expenses were approximately $ 12.3 million and $ 11.6 , respectively. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We do not have any significant leases that have not yet commenced but that create significant rights and obligations for us. We have elected the practical expedient under ASC 842 to not separate lease and nonlease components. Our real estate and equipment leases often require that we pay maintenance in addition to rent. Additionally, our real estate leases generally require payment of real estate taxes and insurance. Maintenance, real estate taxes, and insurance payments are generally variable and based on actual costs incurred by the lessor. Therefore, these amounts are not included in the consideration of the contract when determining the ROU asset and lease liability, but are reflected as variable lease expenses. A majority of our lease agreements include fixed rental payments. Certain of our lease agreements include fixed rental payments that are adjusted periodically by a fixed rate or changes in an index. The fixed payments, including the effects of changes in the fixed rate or amount, and renewal options reasonably certain to be exercised, are included in the measurement of the related lease liability. Most of our real estate leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The exercise of lease renewal options is at our sole discretion. If it is reasonably certain that we will exercise such options, the periods covered by such options are included in the lease term and are recognized as part of our right of use assets and lease liabilities. The depreciable life of assets and leasehold improvements are limited by the expected lease term, which includes renewal options reasonably certain to be exercised . For our incremental borrowing rate, we generally use a portfolio approach to determine the discount rate for leases with similar characteristics . We determine discount rates based upon our hypothetical credit rating, taking into consideration our short-term borrowing rates, and then adjusting as necessary for the appropriate lease term. As of March 31, 2022, the weighted-average discount rate used was approximately 5.6 %. As of March 31, 2022, maturities of lease liabilities by fiscal year are summarized as follows: (Amounts in thousands) 2022 $ 7,620 2023 14,555 2024 13,180 2025 10,880 2026 10,179 Thereafter 89,578 Total lease payments 145,992 Less: interest ( 42,333 ) Present value of lease liabilities $ 103,659 Supplemental cash flow information related to leases was as follows: Six Months Ended March 31, 2021 2022 (Amounts in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 8,670 $ 3,995 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 70,714 $ 1,316 13 7 . INVENTORIES: Inventories are stated at the lower of cost or net realizable value. The cost of inventories purchased from our vendors consist of the amount paid to acquire the inventory, net of vendor consideration and purchase discounts, the cost of equipment added, reconditioning costs, inventory deposits, and transportation costs relating to acquiring inventory for sale. Trade-in used boats are initially recorded at fair value and adjusted for reconditioning and other costs. The cost of inventories that are manufactured by the Company consist of material, labor, and manufacturing overhead. Unallocated overhead and abnormal costs are expensed as incurred. New and used boats, motors, and trailers inventories are accounted for on a specific identification basis. Raw materials and parts, accessories, and other inventories are accounted for on an average cost basis. We utilize our historical experience, the aging of the inventories, and our consideration of current market trends as the basis for determining a lower of cost or net realizable value. We do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions we use to calculate our valuation allowance which would result in a material effect on our operating results. As of September 30, 2021 and March 31, 2022, our valuation allowance for new and used boat, motor, and trailer inventories was $ 0.4 million and $ 0.6 million, respectively. If events occur and market conditions change, causing the fair value to fall below carrying value, the valuation allowance could increase. Inventories, net consisted of the following as of: September 30, 2021 March 31, 2022 (Amounts in thousands) New and used boats, motors, and trailers $ 193,888 $ 268,567 Parts, accessories, and other 13,779 18,261 Work-in-process 11,358 18,464 Raw materials 11,959 24,439 Inventories, net $ 230,984 $ 329,731 8 . IMPAIRMENT OF LONG-LIVED ASSETS: FASB ASC 360-10-40, “Property, Plant, and Equipment — Impairment or Disposal of Long-Lived Assets” (“ASC 360-10-40”), requires that long-lived assets, such as property and equipment and purchased intangibles subject to amortization, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset (or asset group) is measured by comparison of its carrying amount to undiscounted future net cash flows the asset (or asset group) is expected to generate over the remaining life of the asset (or asset group). If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset (or asset group) exceeds its fair market value. Estimates of expected future cash flows represent our best estimate based on currently available information and reasonable and supportable assumptions. Our impairment loss calculations contain uncertainties because they require us to make assumptions and to apply judgment in order to estimate expected future cash flows. Any impairment recognized in accordance with ASC 360-10-40 is permanent and may not be restored. Based upon our most recent analysis, we believe no impairment of long-lived assets existed as of March 31, 2022. 9 . GOODWILL: We account for acquisitions in accordance with FASB ASC 805, “Business Combinations” (“ASC 805”), and goodwill in accordance with ASC 350, “Intangibles — Goodwill and Other” (“ASC 350”). For business combinations, the excess of the purchase price over the estimated fair value of net assets acquired in a business combination is recorded as goodwill. 14 In November 2021, we completed acquisitions for Intrepid, a premier manufacturer of powerboats, and Texas MasterCraft, a watersports dealer in Northern Texas for aggregate consideration of approximately $ 67.2 million (net of cash acquired of $ 9.4 million), including estimated contingent consideration of $ 6.0 million. Tangible assets acquired, net of liabilities and cash acquired, totaled approximately $ 20.3 million; intangible assets acquired totaled $ 7.3 million; and total goodwill recognized was approximately $ 39.6 million. The goodwill represents the assembled workforce, acquired capabilities, and future economic benefits resulting from the acquisitions. Approximately $ 10.7 million of goodwill related to the acquisitions, wholly attributable to Texas MasterCraft, is deductible for tax purposes. Purchase price allocations are preliminary pending receipt of final valuation analyses of certain assets from our valuation advisor. In July 2021 we purchased Nisswa Marine a full-service dealer located in Nisswa, Minnesota. In May 2021, we purchased Cruisers Yachts, a manufacturer of sport yacht and yachts with sales through our select retail dealership locations and through independent dealers. In October 2020, we purchased SkipperBud’s, one of the largest boat sales, brokerage, service and marina/storage groups in the United States. In total, current and previous acquisitions have resulted in the recording of $ 201.1 million and $ 246.3 million in goodwill and other intangible assets as of September 30, 2021 and March 31, 2022, respectively. In accordance with ASC 350, we test goodwill for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our annual impairment test is performed during the third fiscal quarter. If the carrying amount of a reporting unit’s goodwill exceeds its fair value we recognize an impairment loss in accordance with ASC 350. As of March 31, 2022 , and based upon our most recent analysis, we determined through our qualitative assessment that it is not “more likely than not” that the fair values of our reporting units are less than their carrying values. As a result, we were not required to perform a quantitative goodwill impairment . The following table sets forth the changes in carrying amount of goodwill by reportable segment during the six months ended March 31, 2022: Retail Operations Product Manufacturing Total (Amounts in thousands) Balance as of September 30, 2021 $ 155,429 $ 40,134 $ 195,563 Goodwill acquired 10,706 28,900 39,606 Foreign currency translation ( 637 ) — ( 637 ) Balance as of March 31, 2022 $ 165,498 $ 69,034 $ 234,532 10 . INCOME TAXES: We account for income taxes in accordance with FASB ASC 740, “Income Taxes” (“ASC 740”). Under ASC 740, we recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect those temporary differences to be recovered or settled. We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized by considering all available positive and negative evidence. During the three months ended March 31, 2021 and 2022, we recognized an income tax provision of $ 12.8 million and $ 17.6 million, respectively. During the six months ended March 31, 2021 and 2022, we recognized an income tax provision of $ 20.0 million and $ 28.2 million, respectively. The effective income tax rate for each of the three months ended March 31, 2021 and 2022 was 24.8 % . The effective income tax rate for the six months ended March 31, 2021 and 2022 was 24.2 % and 24.0 %, respectively . 1 1 . SHORT-TERM BORROWINGS AND LONG-TERM DEBT: Short-term Borrowings In May 2020, we entered into a Loan and Security Agreement, which was subsequently amended in July 2021 (as amended to date, the “Credit Facility”), with Wells Fargo Commercial Distribution Finance LLC, M&T Bank, Bank of the West, and Truist Bank. The Credit Facility provides the Company a line of credit with asset based borrowing availability of up to $ 500.0 million for working capital and inventory financing, with the amount permissible pursuant to a borrowing base formula. The Credit Facility expires in July 2024 , subject to extension for two one-year periods, with lender approval . The Credit Facility has certain financial covenants as specified in the agreement. The covenants include provisions that our leverage ratio must not exceed 2.75 to 1.0 and that our current ratio must be greater than 1.2 to 1.0. The interest rate for amounts outstanding under the Credit Facility is 345 basis points plus the greater of 75 basis points or the one-month LIBOR. The Credit Facility allows for the transition of the benchmark interest rate used from LIBOR to the Secured Overnight Finance Rate (“SOFR”). 15 There is an unused line fee of ten basis points on th e unused portion of the Credit Facility. As of March 31, 202 2 , we were in compliance with all covenants under the Credit Facility. New inventory borrowing eligibility will generally mature 1,080 days from the original invoice date. Used inventory borrowing eligibility will generally mature 361 days from the date we acquire the used inventory. The collateral for the Credit Facility is all of our personal property with certain limited exceptions. None of our real estate has been pledged for collateral for the Credit Facility. As of March 31, 2022, our indebtedness associated with financing our inventory and working capital needs totaled approximately $ 59.1 million and included unamortized debt issuance costs of approximately $ 0.2 million. As of March 31, 2021 and 2022, the interest rate on the outstanding short-term borrowings was approximately 4.20 %. As of March 31, 2022, our additional available borrowings under our Credit Facility were approximately $ 94.9 million based upon the outstanding borrowing base availability. As is common in our industry, we receive interest assistance directly from boat manufacturers, including Brunswick. The interest assistance programs vary by manufacturer, but generally include periods of free financing or reduced interest rate programs. The interest assistance may be paid directly to us or our lender depending on the arrangements the manufacturer has established. We classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales. The availability and costs of borrowed funds can adversely affect our ability to obtain adequate boat inventory and the holding costs of that inventory as well as the ability and willingness of our customers to finance boat purchases. However, we rely on our Credit Facility to purchase our inventory of boats. The aging of our inventory limits our borrowing capacity as defined curtailments reduce the allowable advance rate as our inventory ages. Our access to funds under our Credit Facility also depends upon the ability of our lenders to meet their funding commitments, particularly if they experience shortages of capital or experience excessive volumes of borrowing requests from others during a short period of time. Unfavorable economic conditions, weak consumer spending, turmoil in the credit markets, and lender difficulties, among other potential reasons, could interfere with our ability to utilize our Credit Facility to fund our operations. Any inability to utilize our Credit Facility could require us to seek other sources of funding to repay amounts outstanding under the credit agreements or replace or supplement our credit agreements, which may not be possible at all or under commercially reasonable terms. Similarly, decreases in the availability of credit and increases in the cost of credit adversely affect the ability of our customers to purchase boats from us and thereby adversely affect our ability to sell our products and impact the profitability of our finance and insurance activities. Long-term Debt The below table summarizes the Company's long-term debt. September 30, 2021 March 31, 2022 (Amounts in thousands) Mortgage facility payable to Flagship Bank bearing interest at 2.25 % as of March 31, 2022 (prime minus 100 basis points with a floor of 2.00 % ). Requires monthly principal and interest payments with a balloon payment of approximately $ 4.0 million due August 2027 . $ 6,899 $ 6,652 Mortgage facility payable to Seacoast National Bank bearing interest at 3.00% as of March 31, 2022 ( greater of 3.00% or prime minus 62.5 basis points ). Requires monthly interest payments for the first year and then monthly principal and interest payments with a balloon payment of approximately $ 6.0 million due September 2031 . 17,675 17,086 Mortgage facility payable to Hancock Whitney Bank bearing interest at 2.63 % as of March 31, 2022 ( prime minus 62.5 basis points with a floor of 2.25 % ). Requires monthly principal and interest payments with a balloon payment of approximately $ 15.5 million due November 2027 . 50 % of the outstanding borrowings are hedged with an interest rate swap contract with a fixed rate of 3.20 %. 27,106 26,149 Revolving mortgage facility with FineMark National Bank & Trust bearing interest at 3.00 % as of March 31, 2022 ( base minus 25 basis points with a floor of 3.00 % ). Facility matures in October 2027 . Current available borrowings under the facility were approximately $ 25.3 million at March 31, 2022. — — Total long-term debt 51,680 49,887 Less: current portion ( 3,587 ) ( 3,587 ) Less: unamortized portion of debt issuance costs ( 595 ) ( 553 ) Long-term debt, net current portion and unamortized debt issuance costs $ 47,498 $ 45,747 16 1 2 . STOCK-BASED COMPENSATION: We account for our stock-based compensation plans following the provisions of FASB ASC 718, “Compensation — Stock Compensation” (“ASC 718”). In accordance with ASC 718, we use the Black-Scholes valuation model for valuing all options granted (Note 13) and shares purchased under our Amended 2008 Employee Stock Purchase Plan (“Stock Purchase Plan”). We measure compensation for restricted stock awards and restricted stock units (Note 15) at fair value on the grant date based on the number of shares expected to vest and the quoted market price of our common stock. We recognize compensation cost for all awards in operations on a straight-line basis over the requisite service period for each separately vesting portion of the award. During the three months ended March 31, 2021 and 2022, we recognized stock-based compensation expense of approximately $ 2.4 million and $ 3.9 million, respectively, and for the six months ended March 31, 2021 and 2022, we recognized stock-based compensation expense of approximately $ 4.4 million and $ 7.2 million, respectively, in selling, general, and administrative expenses in the accompanying Unaudited Condensed Consolidated Statements of Operations. Cash received from option exercises under all share-based compensation arrangements for the three months ended March 31, 2021 was approximately $ 0.1 million. No cash was received from option exercises under all share-based compensation arrangements for the three months ended March 31, 2022. Cash received from option exercises under all share-based compensation arrangements for the six months ended March 31, 2021 and 2022, was approximately $ 1.7 million and $ 1.1 million, respectively. We currently expect to satisfy share-based awards with registered shares available to be issued from the Stock Purchase Plan. 1 3 . THE INCENTIVE STOCK PLANS: In February 2022, our shareholders approved a proposal to authorize our 2021 Stock-Based Compensation Plan (“2021 Plan”), which replaced our 2011 Stock-Based Compensation Plan (“2011 Plan”). Our 2021 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, stock units, bonus stock, dividend equivalents, other stock related awards, and performance awards (collectively “awards”), that may be settled in cash, stock, or other property. Our 2021 Plan is designed to attract, motivate, retain, and reward our executives, employees, officers, directors, and independent contractors by providing such persons with annual and long-term performance incentives to expend their maximum efforts in the creation of shareholder value. The total number of shares of our common stock that may be subject to awards under the 2021 Plan is equal to 1,000,000 shares, plus: (i) any shares available for issuance and not subject to an award under the 2007 Plan or the 2011 Plan, which was 545,729 in aggregate at the time of the approval of the 2021 Plan; (ii) the number of shares with respect to which awards granted under the 2021 Plan, the 2011 Plan or the 2007 Plan terminate without the issuance of the shares or where the shares are forfeited or repurchased; (iii) with respect to awards granted under the 2021 Plan, the 2011 Plan and the 2007 Plan, the number of shares that are not issued as a result of the award being settled for cash or otherwise not issued in connection with the exercise or payment of the award; and (iv) the number of shares that are surrendered or withheld in payment of the exercise price of any award or any tax withholding requirements in connection with any award granted under the 2021 Plan, the 2011 Plan or the 2007 Plan. The 2021 Plan terminates in February 2032 , and awards may be granted at any time during the life of the 2021 Plan. The dates on which awards vest are determined by the Board of Directors or the Plan Administrator. The Board of Directors has appointed the Compensation Committee as the Plan Administrator. The exercise prices of options are determined by the Board of Directors or the Plan Administrator and are at least equal to the fair market value of shares of common stock on the date of grant. The term of options under the 2021 Plan may not exceed ten years . The options granted have varying vesting periods. To date, we have not settled or been under any obligation to settle any awards in cash. The following table summarizes activity from our incentive stock plans from September 30, 2021 through March 31, 2022: Shares Available for Grant Options Outstanding Aggregate Intrinsic Value (Amounts in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Life Balance as of September 30, 2021 918,061 115,250 $ 4,085 $ 13.08 1.9 Shares authorized 1,000,000 — — Options cancelled/forfeited/expired 20,000 ( 20,000 ) 7.39 Options exercised — ( 22,500 ) 7.95 Restricted stock awards granted ( 385,073 ) — — Restricted stock awards forfeited 3,650 — — Additional shares of stock issued ( 1,443 ) — — Balance as of March 31, 2022 1,555,195 72,750 $ 1,925 $ 16.22 2.5 Exercisable as of March 31, 2022 68,416 $ 1,891 $ 14.78 2.2 17 No options were granted for the six months ended March 31, 2021 and 2022. The total intrinsic value of options exercised during the six months ended March 31, 2021 and 2022, was $ 1.6 million and $ 1.1 million, respectively. We used the Black-Scholes model to estimate the fair value of options granted. The expected term of options granted is estimated based on historical experience. Volatility is based on the historical volatility of our common stock. The risk-free rate for periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of grant. 1 4 . EMPLOYEE STOCK PURCHASE PLAN: In February 2019, our shareholders approved a proposal to amend our Stock Purchase Plan to increase the number of shares available under that plan by 500,000 shares. The Stock Purchase Plan as amended provides for up to 1,500,000 shares of common stock to be available for purchase by our regular employees who have completed at least one year of continuous service. In addition, there were 52,837 shares of common stock available under our 1998 Employee Stock Purchase Plan, which have been made available for issuance under our Stock Purchase Plan. The Stock Purchase Plan provides for implementation of annual offerings beginning on the first day of October in each of the years 2008 through 2027, with each offering terminating on September 30 of the following year. Each annual offering may be divided into two six-month offerings. For each offering, the purchase price per share will be the lower of: (i) 85% of the closing price of the common stock on the first day of the offering or (ii) 85 % of the closing price of the common stock on the last day of the offering. The purchase price is paid through periodic payroll deductions not to exceed 10 % of the participant’s earnings during each offering period. However, no participant may purchase more than $ 25,000 worth of common stock annually. We used the Black-Scholes model to estimate the fair value of options granted to purchase shares issued pursuant to the Stock Purchase Plan. Volatility is based on the historical volatility of our common stock. The risk-free rate for periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of grant. The following are the weighted average assumptions used for each respective period: Three Months Ended Six Months Ended March 31, March 31, 2021 2022 2021 2022 Dividend yield 0.0 % 0.0 % 0.0 % 0.0 % Risk-free interest rate 0.1 % 0.1 % 0.1 % 0.1 % Volatility 70.2 % 49.1 % 70.2 % 49.1 % Expected life Six Months Six Months Six months Six months As of March 31, 2022, we have issued 1,161,946 shares of common stock under our Stock Purchase Plan since its inception. 1 5 . RESTRICTED STOCK AWARDS: We have granted non-vested (restricted) stock awards (“restricted stock”) and restricted stock units (“RSUs”) to employees, directors, and officers pursuant to the 2021 Plan, the 2011 Plan and the 2007 Plan. The restricted stock awards and RSUs have varying vesting periods, but generally become fully vested between two and four years after the grant date, depending on the specific award, performance targets met for performance-based awards granted to officers, and vesting period for time-based awards. Officer performance-based awards are granted at the target amount of shares that may be earned and the actual amount of the award earned generally could range from 0 % to 175 % of the target number of shares based on the actual specified performance target met. We accounted for the restricted stock awards granted using the measurement and recognition provisions of ASC 718. Accordingly, the fair value of the restricted stock awards, including performance-based awards, is measured on the grant date and recognized in earnings over the requisite service period for each separately vesting portion of the award. The following table summarizes restricted stock award activity from September 30, 2021 through March 31, 2022: Shares/ Units Weighted Average Grant Date Fair Value Non-vested balance as of September 30, 2021 911,429 $ 22.33 Changes during the period: Awards granted 385,073 $ 52.63 Awards vested ( 149,750 ) $ 23.07 Awards forfeited ( 3,650 ) $ 24.68 Non-vested balance as of March 31, 2022 1,143,102 $ 32.43 18 As of March 31, 2022, we had approximately $ 24.6 million of total unrecognized compensation cost, assuming applicable performance conditions are met, related to non-vested restricted stock awards. We expect to recognize that cost over a weighted average period of 2.4 years. 1 6 . NET INCOME PER SHARE: The following table presents shares used in the calculation of basic and diluted net income per share: Three Months Ended Six Months Ended March 31, March 31, 2021 2022 2021 2022 Weighted average common shares outstanding used in calculating basic net income per share 22,143,043 21,861,438 22,083,827 21,880,558 Effect of dilutive options and non-vested restricted stock awards 843,018 668,664 781,123 716,547 Weighted average common and common equivalent shares used in calculating diluted net income per share 22,986,061 22,530,102 22,864,950 22,597,105 For the three months ended March 31, 2021 and 2022, there were no weighted average shares of options and non-vested restricted stock outstanding and 153,825 weighted average shares of options and non-vested restricted stock outstanding, respectively, that were not included in the computation of diluted net income per share because the options’ exercise prices or non-vested restricted stock prices were greater than the average market price of our common stock, and therefore, their effect would be anti-dilutive. For the six months ended March 31, 2021 and 2022, there were 104 and 63,924 weighted average shares of options and non-vested restricted stock outstanding, respectively, that were not included in the computation of diluted net income per share because the options’ exercise prices or non-vested restricted stock prices were greater than the average market price of our common stock, and therefore, their effect would be anti-dilutive. 1 7 . COMMITMENTS AND CONTINGENCIES: We are party to various legal actions arising in the ordinary course of business. While it is not feasible to determine the actual outcome of these actions as of March 31, 2022, we believe that these matters should not have a material adverse effect on our unaudited condensed consolidated financial condition, results of operations, or cash flows. 1 8 . SEGMENT INFORMATION: Change in Reportable Segments Effective May 2, 2021, our operating segments changed as a result of the Company’s acquisition of Cruisers Yachts, which changed management’s reporting structure and operating activities. We now report our operations through two new operating segments, which are also reporting segments: Retail Operations and Product Manufacturing. Reportable Segments The Company’s operating segments are defined by management’s reporting structure and operating activities. Our chief operating decision maker (“CODM”) is our Chief Executive Officer. Our CODM reviews operational income statement information by segment for purposes of making operating decisions, assessing financial performance, and allocating resources. The CODM is not provided asset information by segment. The Company’s reportable segments are the following: Retail Operations. As of March 31, 2022, the Retail Operations segment includes the sale of 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. In addition, we provide repair, maintenance, and slip and storage services; we arrange related boat financing, insurance, and extended service contracts; we offer boat and yacht brokerage sales; and we offer yacht charter services. In the British Virgin Islands we offer the charter of catamarans, through MarineMax Vacations. 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. The Retail Operations segment includes the majority of all corporate costs. 19 Product Manufacturing. 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 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. Intersegment revenue represents yachts that were manufactured in our Product Manufacturing segment and were sold to our Retail Operations segment. The Product Manufacturing segment supplies our Retail Operations segment along with various independent dealers. The following table sets forth revenue and income from operations for each of the Company’s reportable segments for the three and six months ended March 31, Three Months Ended Six Months Ended March 31, March 31, 2021 2022 2021 2022 (Amounts in thousands) Revenue: Retail Operations $ 523,095 $ 577,624 $ 934,618 $ 1,032,242 Product Manufacturing — 46,758 — 81,002 Elimination of intersegment revenue — ( 14,276 ) — ( 30,447 ) Revenue $ 523,095 $ 610,106 $ 934,618 $ 1,082,797 Income from operations: Retail Operations $ 52,870 $ 68,346 $ 84,853 $ 113,469 Product Manufacturing — 4,387 — 7,830 Elimination of intersegment income from operations — ( 950 ) — ( 2,314 ) Income from operations $ 52,870 $ 71,783 $ 84,853 $ 118,985 20