MARINE PRODUCTS CORP Q3 FY2023 earnings call

• Reduction in boat deliveries to dealers due to normalization of retail boat demand post-COVID.
• Dealers optimistic about new 2024 models but concerned about economic slowdown and higher interest rates.
• Supply chains improved but certain components remain challenging.
• Dealers rebuilding inventories toward normalized levels.
• Board declared a regular quarterly cash dividend of $0.14 per share.
• Market share strong: Chaparral sterndrive market share was number two in its size category; combination of Chaparral and Robalo outboards hold third highest market share in their size category.
• New 2024 models well-received, including Chaparral 267 SSX featured on Boating Magazine cover.

Net sales for the third quarter were $77.8 million, a 22% decrease compared to the third quarter of last year. Unit sales decreased by about 24%. Average selling price per boat increased by approximately 5%. Gross profit in the third quarter was $19.2 million, a 23% decrease compared to the third quarter of 2022. EBITDA in the third quarter was $13 million, a 14% decrease compared to the third quarter of 2022. International sales, which accounted for approximately 6% of total sales during the third quarter, decreased by 12% compared to the third quarter of last year. Dealer inventories are increasing toward more normalized levels and continue to be lower than pre-pandemic levels.

• Expect to manage production to approximate retail demand over coming quarters.
• Assess demand via winter boat shows later in the year and into early next year to reassess production rates.
• Feel well-positioned but will reassess after winter boat shows.

• Concerns about potential economic slowdown impacting dealer inventory and orders.
• Higher interest rates affecting dealer carrying costs and ordering behavior.
• Supply chain challenges with certain components.

Q: From a retail perspective, what have you seen over the last 30 days as we head into the winter months and how are you thinking about retail in 2024 at this point?

A: The past 30 days have been seasonally slow. Dealers are cautious, order/delivery period extended due to higher interest rates. For 2024, will reassess demand via winter boat shows.

Q: Would you be able to quantify maybe the average weeks on hand for your dealers right now? And from a dollar perspective, do you feel like dealers are carrying more inventory than they did pandemic?

A: Don't have complete visibility into dealers' total inventory. Average cost of boats up from pre-pandemic. Floor plan providers determine financing levels.

Q: Looking ahead to the fourth quarter, are you expecting a further reduction in production given where inventories are at right now exiting the third quarter?

A: No, production is scheduled out based on dealer demand and seasonality, no plan to reduce production in the next 2.5 months.

Q: Can you talk about where you were seeing the strongest orders for which products and maybe the mix of products that dealers were seeing the strongest orders?

A: No major shifts, still strong momentum with larger boats. No particular dramatic shift in sterndrive vs outboard or Robalo vs Chaparral.

Q: Can you talk about how promotional support to dealers trended throughout the third quarter and any step up in the fourth quarter needed?

A: Little significant promotional support in Q3. Will assess inventories, competition, and demand via winter boat shows to determine appropriate support for Q4.