This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements include
statements regarding our "expectations," "anticipations," "intentions," "plans,"
"beliefs," or "strategies" regarding the future. These forward-looking
statements include statements relating to market risks such as interest rate
risk and foreign currency exchange rate risk; economic and industry conditions
and corresponding effects on consumer behavior and operating results;
environmental conditions; inclement weather; certain specific and isolated
events; our future estimates, assumptions and judgments, including statements
regarding whether such estimates, assumptions and judgments could have a
material adverse effect on our operating results; the impact of changes in
accounting policy and standards; our plans to accelerate our growth through
acquisitions and new store openings; our belief that our existing capital
resources will be sufficient to finance our operations for at least the next 12
months, except for possible significant acquisitions; the seasonality and
cyclicality of our business and the effect of such seasonality and cyclicality
on our business, financial results and inventory levels; the scope and duration
of the COVID-19 pandemic and its impact on global economic systems, our
employees, sites, operations, customers, suppliers and supply chain; and the
Company's ability to manage growth effectively. Actual results could differ
materially from those currently anticipated as a result of a number of factors,
including those set forth under "Risk Factors" in our Annual Report on Form 10-K
for the fiscal year ended September 30, 2020.
General
In March 2020, the outbreak of COVID-19 caused by a novel strain of the
coronavirus was recognized as a pandemic by the World Health Organization, and
the outbreak is widespread throughout the United States (including Florida in
which we generated approximately 54% of our revenue during both fiscal 2019 and
2020), and in other countries in which we operate. As a result, from March 2020
through June 2020, we temporarily closed certain departments or locations based
on guidance from local government or health officials. Currently, all of our
stores are fully operational, but the effects of COVID-19 (including the related
international, federal, state, and local governmental actions and regulations)
remain unpredictable. We are following guidelines to ensure we are safely
operating as recommended. Where possible, we are offering private personal
showings as well as virtual appointments. Our digital platform is serving as an
effective solution in this environment with robust online activity. Our
experienced teams continue to engage with customers virtually and in our stores
to help customers select their boats, and obtain appropriate services.
We are the largest recreational boat and yacht retailer in the United States
with fiscal 2020 revenue above $1.5 billion. Through our current 78 retail
locations in 21 states, we sell new and used recreational boats and related
marine products, including engines, trailers, parts, and accessories. We also
arrange related boat financing, insurance, and extended service contracts;
provide boat repair and maintenance services; offer yacht and boat brokerage
sales; and, where available, offer slip and storage accommodations, as well as
the charter of power yachts in the British Virgin Islands. We also own Fraser
Yachts Group, a leading superyacht brokerage and luxury yacht services company
with operations in multiple countries. In July 2020, we acquired Northrop &
Johnson, another leading superyacht brokerage and services company with
operations in multiple countries. In October 2020, we purchased all of the
outstanding equity of SkipperBud's. SkipperBud's is one of the largest boat
sales, brokerage, service and marina/storage groups in the United States. In May
2021, we purchased all of the outstanding equity of Cruisers Yachts. Cruisers
Yachts, a wholly-owned MarineMax subsidiary, manufactures boats and yachts with
sales through our select retail dealership locations and through independent
dealers, and is recognized as one of the world's premier manufacturers of
premium yachts.
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 31 recreational boat dealers, four boat brokerage
operations, two full-service yacht repair operations, and one manufacturer. As a
part of our acquisition strategy, we frequently engage in discussions with
various recreational boat dealers regarding their potential acquisition by
us. Potential acquisition discussions frequently take place over a long period
of time and involve difficult business integration and other issues, including,
in some cases, management succession and related matters. 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 two acquisitions in the fiscal year ended September
30, 2019, two acquisitions in fiscal 2020, and three acquisitions to date in
fiscal 2021.
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% of our revenue
during both fiscal 2019 and 2020, 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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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 could 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.
Although past economic conditions have adversely affected our operating results,
we believe during and after such conditions we have capitalized on our core
strengths to substantially outperform the industry, resulting in market share
gains. 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. 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. We expect our core strengths and
retailing strategies including our digital platform, will position us to
capitalize on growth opportunities as they occur and will allow us to emerge
with greater earnings potential.
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. See Note 17 of
the Notes to Unaudited Condensed Consolidated Financial Statements.
The Retail Operations segment includes the activity of our current 78 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. 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; yacht charter services; and we operate a
yacht charter business in the 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.
The Product Manufacturing segment includes activity of Cruisers Yachts, a
wholly-owned MarineMax subsidiary, manufacturing boats 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 yachts, producing models from 33' to 60' feet.
Application of Critical Accounting Policies
See Part II, Item 7, "Application of Critical Accounting Policies" in our Annual
Report on Form 10-K for the fiscal year ended September 30, 2020. There have
been no material changes to our critical accounting policies since our Annual
Report on Form 10-K for the fiscal year ended September 30, 2020.
Recent Accounting Pronouncements
See Note 3 of the Notes to Unaudited Condensed Consolidated Financial
Statements.
Consolidated Results of Operations
The following discussion compares the three and nine months ended June 30, 2021,
with the three and nine months ended June 30, 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 June 30, 2021 Compared with Three Months Ended June 30, 2020
Revenue. Revenue increased $168.0 million, or 33.7%, to $666.3 million for the
three months ended June 30, 2021, from $498.3 million for three months ended
June 30, 2020. The increase was due to a net increase of $28.5 million or 5.7%
in comparable-store sales and an increase of $139.5 million from stores opened,
stores closed, and acquisitions that are not eligible for inclusion in
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the comparable-store base for the full period. The increase in our
comparable-store sales was primarily due to demand driven increases in new boat
revenue and our higher margin finance and insurance products, brokerage, parts,
service, and storage services.
Gross Profit. Gross profit increased $81.2 million, or 65.7%, to $204.7 million
for the three months ended June 30, 2021, from $123.5 million for the three
months ended June 30, 2020. Gross profit as a percentage of revenue increased to
30.7% for the three months ended June 30, 2021 from 24.8% for the three months
ended June 30, 2020. The increase in gross profit as a percentage of revenue was
primarily the result of demand driven price increases resulting in greater new
and used boat margins and increases in our higher margin businesses, including
additional sales by Northrop & Johnson (which typically carry higher margins),
as a percentage of sales. The increase in gross profit dollars was primarily
attributable to increased new boat sales.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expense increased $49.0 million, or 65.5%, to $123.8 million for
the three months ended June 30, 2021, from $74.8 million for the three months
ended June 30, 2020. Selling, general, and administrative expenses as a
percentage of revenue increased to 18.6% for the three months ended June 30,
2021 from 15.0% for the three months ended June 30, 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.
Interest Expense. Interest expense decreased $1.5 million, or 71.4%, to $0.6
million for the three months ended June 30, 2021, from $2.1 million for the
three months ended June 30, 2020. Interest expense as a percentage of revenue
decreased to 0.1% for the three months ended June 30, 2021 from 0.4% for the
three months ended June 30, 2020. The decrease in interest expense was primarily
the result of decreased borrowings.
Income Taxes. Income tax expense increased $9.1 million, or 78.4%, to $20.7
million for the three months ended June 30, 2021, from $11.6 million for the
three months ended June 30, 2020. Our effective income tax rate increased to
25.7% for the three months ended June 30, 2021, from 24.9% for three months
ended June 30, 2020. The increase in the effective income tax rate was primarily
attributed to minor changes in the allocation of pre-tax income between taxing
jurisdictions.
Nine Months Ended June 30, 2021 Compared with Nine Months Ended June 30, 2020
Revenue. Revenue increased $490.0 million, or 44.1%, to $1.601 billion for the
nine months ended June 30, 2021, from $1.111 billion for the nine months ended
June 30, 2020. The increase was due to a net increase of $230.3 million or 20.7%
in comparable-store sales and an increase of $259.7 million from stores opened,
stores closed, and acquisitions that are not eligible for inclusion in the
comparable-store base for the full period. The increase in our comparable-store
sales was primarily due to demand driven increases in new and used boat revenue
and our higher margin finance and insurance products, brokerage, parts, service,
and storage services.
Gross Profit. Gross profit increased $202.7 million, or 71.8%, to $484.9 million
for the nine months ended June 30, 2021, from $282.2 million for the nine months
ended June 30, 2020. Gross profit as a percentage of revenue increased to 30.3%
for the nine months ended June 30, 2021 from 25.4% for the nine months ended
June 30, 2020. The increase in gross profit as a percentage of revenue was
primarily the result of demand driven price increases resulting in greater new
and used boat margins and increases in our higher margin businesses, including
additional sales by Northrop & Johnson (which typically carry higher margins),
as a percentage of sales. The increase in gross profit dollars was primarily
attributable to increased new and used boat sales.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expense increased $110.8 million, or 53.2%, to $319.1 million for
the nine months ended June 30, 2021, from $208.3 million for the nine months
ended June 30, 2020. Selling, general, and administrative expenses as a
percentage of revenue increased to 19.9% for the nine months ended June 30, 2021
from 18.7% for the nine months ended June 30, 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.
Interest Expense. Interest expense decreased $5.5 million, or 64.7%, to $3.0
million for the nine months ended June 30, 2021, from $8.5 million for the nine
months ended June 30, 2020. Interest expense as a percentage of revenue
decreased to 0.2% for the nine months ended June 30, 2021 from 0.8% for the nine
months ended June 30, 2020. The decrease in interest expense was primarily the
result of decreased interest rates and decreased borrowings.
Income Taxes. Income tax expense increased $24.2 million, or 147.6%, to $40.6
million for the nine months ended June 30, 2021, from $16.4 million for the nine
months ended June 30, 2020. Our effective income tax rate decreased to 24.9% for
the nine months ended June 30, 2021, from 25.1% for the nine months ended June
30, 2020. The decrease in the effective income tax rate was primarily attributed
to excess equity compensation for tax purposes.
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Liquidity and Capital Resources
Our cash needs are primarily for working capital to support operations,
including new and used boat and related parts inventories, off-season liquidity,
and growth through acquisitions. Acquisitions remain an important strategy for
us, and we plan to continue our growth through this strategy in appropriate
circumstances. 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
also use this evaluation in conjunction with our review of our current and
expected operating performance and expected business levels to determine the
adequacy of our financing needs.
These cash needs historically have been financed with cash generated from
operations and borrowings under the Credit Facility (described below). Our
ability to utilize the Credit Facility to fund operations depends upon the
collateral levels and compliance with the covenants of the Credit Facility. 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 June 30, 2021, 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 nine months ended June 30, 2021 and 2020, cash provided by operating
activities was approximately $329.6 million and $221.3 million,
respectively. For the nine months ended June 30, 2021, cash provided
by operating activities was primarily related to decreases in inventory
(excluding acquisitions), 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, stock-based
compensation expense, and deferred income tax provision, partially offset by
increases in accounts receivable, decreases in accounts payable, and increases
in prepaid expenses and other assets. For the nine months ended June 30, 2020,
cash provided by operating activities was primarily related to decreases in
inventory, increases in accrued expenses and other liabilities, increases in
contract liabilities (customer deposits), increases in accounts payable, and our
net income adjusted for non-cash expenses such as depreciation and amortization
expense, stock-based compensation expense, and deferred income tax provision,
partially offset by increases in accounts receivable, and increase in prepaid
expenses and other assets.
For the nine months ended June 30, 2021 and 2020, cash used in investing
activities was approximately $131.1 million and $7.2 million, respectively. For
the nine months ended June 30, 2021, cash used in investing activities was
primarily used for acquisitions, to purchase property and equipment associated
with improving existing retail facilities, and to purchase investments,
partially offset by proceeds from insurance settlements. For the nine months
ended June 30, 2020, cash used in investing activities was primarily used to
purchase property and equipment associated with improving existing retail
facilities, and for acquisitions, partially offset by proceeds received from the
sale of property and equipment.
For the nine months ended June 30, 2021 and 2020, cash used in financing
activities was approximately $154.1 million and $165.9 million, respectively.
For the nine months ended June 30, 2021, cash used in financing activities was
primarily attributable to net payments for short-term borrowings, purchase of
treasury stock, payments on tax withholdings for equity awards, payments for
long-term debt, and contingent acquisition consideration payments, partially
offset by proceeds from long-term debt and net proceeds from issuance of common
stock under incentive compensation and employee purchase plans. For the nine
months ended June 30, 2020, cash used in financing activities was primarily
attributable to net payments for short-term borrowings, and payments on tax
withholdings for equity awards, partially offset by net proceeds from issuance
of common stock under incentive compensation and employee purchase plans.
In July 2021, we entered into an Amended and Restated Loan and Security
Agreement (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 million for working capital and inventory financing, with the amount
permissible pursuant to a borrowing base formula. The Credit Facility has a
three-year term and 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. There is an
unused line fee of ten basis points on the unused portion of 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. Advances on new inventory will
generally mature 1,080 days from the original invoice date. Advances on used
inventory will mature 361 days from the date we acquire the used inventory. Each
advance is subject to a curtailment schedule, which requires that we pay down
the balance of each advance on a periodic basis starting after six months. The
curtailment schedule varies based on the type and value of the inventory. The
collateral for the Credit Facility is primarily the Company's inventory that is
financed through the Credit Facility and related accounts receivable. None of
our real estate has been pledged for collateral for the Credit Facility.
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As of June 30, 2021, our indebtedness associated with financing our inventory
and working capital needs totaled approximately $2.9 million. As of June 30,
2020 and 2021, the interest rate on the outstanding short-term borrowings was
approximately 3.9% and 4.2%, respectively. As of June 30, 2021, our additional
available borrowings under our Credit Facility were approximately $102.9 million
based upon the outstanding borrowing base availability.
As of June 30, 2021 we had approximately $48.4 million in long-term debt, net of
current maturities as a result of our mortgage facilities. See Note 10 of the
Notes to Unaudited Condensed Consolidated Financial Statements.
Except as specified in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and in the unaudited condensed consolidated
financial statements in the "Financial Statements (Unaudited)", we have no
material commitments for capital for the next 12 months. Based on the
information currently available to us, the COVID-19 pandemic's impact on
consumer demand is uncertain, however, we believe that the cash generated from
sales and our existing capital resources will be adequate to meet our liquidity
and capital requirements for at least the next 12 months, except for possible
significant acquisitions.
Impact of Seasonality and Weather on Operations
Our business, as well as the entire recreational boating industry, is highly
seasonal, with seasonality varying in different geographic markets. With the
exception of Florida, we generally realize significantly lower sales and higher
levels of inventories, and related short-term borrowings, in the quarterly
periods ending December 31 and March 31. The onset of the public boat and
recreation shows in January generally stimulates boat sales and typically allows
us to reduce our inventory levels and related short-term borrowings throughout
the remainder of the fiscal year. Our business could become substantially more
seasonal if we acquire additional dealers that operate in colder regions of the
United States or close retail locations in warm climates.
Our business is also subject to weather patterns, which may adversely affect our
results of operations. 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. 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. Although our geographic diversity is
likely to reduce the overall impact to us of adverse weather conditions in any
one market area, these conditions will continue to represent potential, material
adverse risks to us and our future financial performance.
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