Earnings call transcript: Marine Products Q1 2025 sees revenue decline

Marine Products Corporation (MPX) reported its Q1 2025 earnings, revealing a mixed performance with a notable decline in revenue and earnings per share (EPS) compared to the previous year. The company’s stock reacted negatively in pre-market trading following the announcement. According to InvestingPro data, the company maintains a strong financial health score, with particularly robust cash flow metrics. InvestingPro subscribers have access to 7 additional key insights about MPX’s financial position and growth prospects.

Key Takeaways

• Q1 2025 revenue was $59 million, down 15% year-over-year.
• EPS dropped to $0.06 from $0.13 in Q1 2024.
• Pre-market stock price fell by 5% to $8.17.
• The company maintains a strong cash position of $57 million with no debt.
• Anticipates potential sales growth in the second half of 2025.

Company Performance

Marine Products faced a challenging first quarter as sales decreased by 15% year-over-year, driven by a 19% decline in boat sales. Despite the downturn, the company managed to maintain strong operating cash flow and a robust cash position, which could support future growth initiatives. The broader marine industry is currently grappling with elevated channel inventory and an uncertain interest rate environment, which have contributed to the company’s recent performance challenges.

Financial Highlights

• Revenue: $59 million, a 15% decrease from the previous year.
• Earnings per share: $0.06, down from $0.13 in Q1 2024.
• Gross profit: $11 million with an 18.6% margin, down 160 basis points.
• Operating cash flow: $10.8 million.
• Free cash flow: $10.7 million.
• Cash position: $57 million with no outstanding debt.

Earnings vs. Forecast

Marine Products’ actual EPS of $0.06 fell short of market expectations, leading to a negative market reaction. The revenue of $59 million also underperformed compared to anticipated figures, reflecting the ongoing challenges in the marine sector.

Market Reaction

Following the earnings release, Marine Products’ stock price dropped by 5% in pre-market trading, reaching $8.17. This decline reflects investor concerns over the company’s ability to navigate current market challenges and return to growth. The stock remains closer to its 52-week low of $7.49, indicating ongoing pressure. Based on InvestingPro Fair Value analysis, MPX currently appears slightly undervalued. For comprehensive valuation insights and access to detailed Pro Research Reports covering 1,400+ US stocks, consider an InvestingPro subscription.

Outlook & Guidance

Looking ahead, Marine Products remains cautiously optimistic about potential sales growth in the latter half of 2025. The company is preparing for the rollout of its Model Year 2026 products and is actively managing channel inventory. With a strong Altman Z-Score of 7.68 and zero debt-to-equity ratio, the company is well-positioned to weather market uncertainties. However, interest rate fluctuations and potential tariff impacts remain key considerations for future performance. InvestingPro subscribers can access detailed financial health metrics and expert analysis to better understand MPX’s growth potential and risk factors.

Executive Commentary

• "We are still cautiously optimistic that we have reached a trough." - Ben Palmer, President and CEO
• "Conservatism and prudence continue to be our approach." - Ben Palmer, President and CEO
• "We are actively seeking acquisitions to expand our business and have ample liquidity to take advantage of opportunities." - Ben Palmer, President and CEO

Risks and Challenges

• Elevated channel inventory could pressure sales and margins.
• Uncertain interest rate environment may impact consumer demand.
• Potential tariffs could affect pricing and profitability.
• Competition in the marine sector remains intense, requiring continuous innovation.
• Macroeconomic conditions could influence overall market sentiment.

Without specific Q&A details from the earnings call, further insights into analyst concerns or additional strategic plans are limited. However, Marine Products’ management has expressed a commitment to navigating these challenges with a prudent and conservative approach.

Full transcript - Marine Products Corp (MPX) Q1 2025:

Conference Operator: Good morning, and thank you for joining us for the Marine Products Corporation’s First Quarter twenty twenty five Earnings Conference Call. Today’s call will be hosted by Ben Palmer, President and CEO and Mike Schmidt, Chief Financial Officer. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions.

I would like to advise everyone that this conference call is being recorded. I will now turn the call over to Mr. Schmidt.

Mike Schmidt, Chief Financial Officer, Marine Products Corporation: Thank you, and good morning. Before we begin, I want to remind you that some of the statements that will be made on this call could be forward looking in nature and reflect a number of known and unknown risks. Please refer to our press release issued today along with our 2025 sorry, our twenty twenty four ten ks and other public filings that outline those risks, all of which can be found at www.marineproductscorp.com. In today’s earnings release and conference call, we’ll be referring to several non GAAP measures of operating performance and liquidity. We believe these non GAAP measures allow us to compare performance consistently over various periods.

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,

Ben Palmer, President and CEO, Marine Products Corporation: and thank you all for joining our call. First 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, an 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 flow 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 twenty three to the end of twenty 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 and 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 investors, and it’s too soon to project anything definitively given the ongoing nature of negotiations to this point. From input cost standpoint, key purchases would be engines, navigation systems, stainless steel, 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 are 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 industry and hoping for as much relief as possible. Regarding interest rates, while we had originally been hoping for steady rate relief, the 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, still look forward to delivering new models and feature and design enhancements across both Chaparral and Revallo brands.

Regardless of market conditions, our brand reputation is still the lifeblood of our business. Constant innovations and new designs must continue and fortunately we have the financial strength to sustain those efforts. Now Mike will provide an overview of the financial results.

Mike Schmidt, Chief Financial Officer, Marine Products Corporation: Thanks Ben. Shifting to the first quarter with year over year comparisons to 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 the 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 costs 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 $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 CapEx was just under $100,000 in the period. 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 an S3 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 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.

Ben Palmer, President and CEO, Marine Products Corporation: 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 assets looking for Nexa.

On a separate note, we’d like to welcome Steve Lewis, 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 want to 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.

Conference Operator: I will now turn the call back over to Ben Palmer. Please go ahead.

Ben Palmer, President and CEO, Marine Products Corporation: Thank you, operator. Appreciate you listening in on the call today, and hope you have a good rest of the day and look forward to touching base soon. Take care.

Conference Operator: 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.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.