Marine Products Corporation Price & Performance (MPX)

Our press release issued today and our website contain reconciliations of these non GAAP measures to the most directly comparable GAAP measures. I will now turn the call over to our President and CEO, Ben Palmer. Thanks, Mike. And thank you all for joining our call. Quarter results were down compared to prior year.

However, our trends are beginning to stabilize following significant top line declines last year. For context, in 2024, our quarterly sales declines were in the low 30% to low 40% range. Following unprecedented post COVID demand through the mid part of twenty twenty three. Whereas in the first quarter of twenty twenty five, sales were down 15% year over year. On a more positive note, sales were up 23% sequentially compared to the fourth quarter of twenty twenty four. As we said last quarter, we are seeing some signs of stabilization, and we still believe we are in position to see year over year sales growth in the second half of the year. While that trend is headed in the right direction, we are still in a challenging and uncertain environment. Marine industry continues to work through elevated levels of channel inventory. And unclear interest rate environment and now uncertainty with respect to tariff impacts. However, we are still cautiously optimistic that we have reached a trough. We are focused on managing costs and production levels as tightly as possible. Maximizing cash flows, and positioning ourselves for improved demand in the future. Channel inventory has been the most pressing challenge we and our peers have faced over the past eighteen months or so.

A few months ago, we disclosed our field inventory units were down 15% when comparing to the end of twenty three to the end of twenty four. And we are pleased to report that our first quarter channel inventories were down 18 versus the year ago quarter. So we continue to make progress are comfortable where we stand from a channel inventory perspective. This has been a collaborative effort with our dealers, balancing the need for smooth production schedules and fixed cost absorption. With the hesitation from the dealer network and taking more inventory without visible near term demand catalysts. Conservatism and prudence continue to be our approach. We know tariffs are top of mind for and it's it's too soon to project anything definitively given the ongoing nature of negotiations to this point. From input cost standpoint, key purchase would be engines, navigation systems, stainless steel, aluminum aluminum, and fiberglass. It is highly likely that tariffs on these items and other materials would result in model price increases. We have limited visibility on the outcome, but doing everything possible to keep an open dialogue with our government representatives, trade associations, and vendor partners. Together, we are communicating the potential negative impacts of tariffs on our industry and hoping for as much relief as possible.

Regarding interest rates, while we had originally been hoping for steady rate relief, outlook for rates remains unclear. As the Fed balances economic impacts from tariffs and trade policy on inflation and the growth outlook. It's fair to say that we hope for lower rates, but acknowledge that if rates come down, it could be in response to a deteriorating domestic economy. Which would inherently be unfavorable. As we pass from the spring selling season into summer, we will be in close touch with our dealers on our model year 2026 rollout. In the current environment, we will proceed carefully being mindful of channel inventory and dealer and consumer appetite for new boats. But still look forward to delivering new models, and feature and design enhancements across both Chaparral and Revolo brands. Regardless of market conditions, our brand reputation is still the like blood of our business. Constant innovations and new designs must continue fortunately, we have the financial strength to sustain those efforts. Now Mike will provide an overview of the financial results.

Thanks, Ben. Shifting to the first quarter, with year over year comparisons for the first quarter of twenty twenty four, sales were down 15% to $59,000,000 driven by a 19% decrease in the number of boats sold.

Price and mix netted to a positive 4%. We know the quarterly sales decreases have been easing for the past several quarters. And as Ben mentioned, we see potential to deliver sales growth versus the prior year in second half of twenty twenty five. Gross profit decreased to $11,000,000 with gross profit margin of 18.6% down 160 basis points. The decline is due to lower volumes and reduced fixed cost absorption. Which more than offset the favorable price and mix effects. SG and A expenses were $8,300,000 in the quarter down 5% or $400,000 compared to last year's first quarter. These expenses decreased primarily due to cost that vary with sales and profitability. Such as incentive compensation, sales commissions and warranty expense. SG and A as a percentage of sales was 14.1%. Up 150 basis points compared to the prior year's first quarter. Due to fixed overhead and reduced sales. Our tax rate was 27.8% in the quarter. And is likely to be slightly below this level for the remainder of the year. Diluted EPS was $0.06 in the first quarter down from $0.13 last year. EBITDA was $3,400,000 down from $5,900,000. In the quarter, we generated strong operating cash flow of $10,800,000 and free cash flow of 10,700,000.0 CapEx was just under a hundred thousand dollars in the period And while we expect lower CapEx this year compared to last, it will likely pick up in the coming quarters and track toward $3,000,000 for the full year.

We paid $4,900,000 in dividends and finished the quarter with cash of $57,000,000 and no debt. On another topic, you may have seen the company has filed s three registration statement with the SEC. Which includes the registering of the Rollins Family Control Group shares. The Rollins family has been a longtime shareholder with ongoing representation on our board. They have always been very supportive of the company, and we do not believe this changes that relationship. We we view the registration of the control group shares as good corporate housekeeping. I'll now turn it back over to Ben for a few closing remarks.

Mhmm.

Thank you, Mike. Recent results have been a challenge for us and the marine industry overall. However, our discipline and focus on cash generation remains intact. We are still actively seeking acquisitions to expand our business and have ample liquidity to take advantage of opportunities as they arise. We're looking at various boat categories where we don't have existing products and believe we will be a buyer of choice for owners of quality looking for an exit On a separate note, we like to welcome Steve Lewis to our board of directors after being elected this week. Steve retired from the law firm Troutman Pepper. Formerly Troutman Sanders, in 2023 where he had served in various leadership roles, including chairman and CEO At the same time, Gary Rollins and Pam Rollins have retired from our board. We thank them for their years of contributions leadership and service. In closing, I wanna always thank our dealers for their continued collaboration and support. And our employees for their dedication and hard work. That concludes our prepared remarks. With that, operator, please open the line for any questions.

I will now turn the call back over to Ben Palmer, Please go ahead.

Thank you, operator. Appreciate you listening in on the call today, and hope you have a good rest of day and look forward to touching base soon. Take care.

Today's call will be available for replay on marineproductscorp.com within two hours following the completion of the call. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.