In order to complete our analysis of the US boat dealers industry – industry that seems attractive to us because it is highly segmented, highly prone to the serial acquirer model, and trading at attractive multiples due to anticipating an imminent recession (among other things) – today we analyse the main competitor of OneWater Marine, MarineMax. We have been following MarineMax for about a year since we learned about it through their acquisition of IGY Marinas (when we were already looking for ways to invest in marinas).
Today, we focus on understanding the business of MarineMax (which, although similar, is not exactly the same as OneWater Marine) and conducting a comparative analysis of the key differences between the two. Finally, we provide our opinion, strategy, and next steps (aspects to follow, opportunities, scenarios…)
What is Marine Max $HZO?
$HZO is the world’s largest recreational boat, yacht, and superyacht services company. It has been a public company since 1998, with a market capitalization of $750 million. The main part of its business comes from the dealership of new and used boats, where it is also a serial acquirer due to the characteristics of the sector (as mentioned in the thesis of its main competitor, OneWater Marine).
However, since 2020, they have focused on expanding their marina business (in 2020, with the acquisition of 11 marinas, but mainly in 2022, with the acquisition of IGY Marinas – 23 premium Marinas worldwide). This segment now accounts for approximately 10% of their annual revenue. They are also manufacturers of two brands (Intrepid & Cruisers), offer luxury yacht brokerage services (including charters), and have financing and maintenance segments.
We briefly explained their business segments to then focus on the comparative analysis of the company.
- New Boat Sales
It is their main division, focusing on premium products with an average selling price of $256,000 compared to an industry average of $71,000 and $209,000 for OneWater Marine.
They market both superyachts from top brands such as Azimut, Bennetti, Ocean Alexander, and Princess, as well as pleasure boats from well-known brands like Brunswick Sea Ray, fishing boats like Boston Whaler, and other types of pontoon and ski boats, representing more than 30 brands in total.
They have 78 retail locations, a number that has remained relatively stable over the past 3 years, increasing only from 77 to 78.
- Repair, Maintenance & Marinas
Repair services account for 3.3% of the revenue (both warranty – mainly Brunswick – and non-warranty), Maintenance 1% of the revenue and Marinas around 8% (in 2023) of the company total revenue.
Indeed, since the acquisition of IGY Marinas in 2022, they have started to break down and emphasize this segment, which we believe will become increasingly important. Not only have they focused on acquiring marinas since 2020 instead of expanding the number of dealership locations, but they have also recently acquired their own marina construction company. They have mentioned in recent conference calls their plans to build their own marina in Florida (Tarpon Springs) and are actively seeking potential acquisitions in this segment.
Our perspective is that the EV/EBITDA multiple for this part of the business should be considerably higher than that of the traditional dealership business (due to its quality, recurring revenue, and counter-cyclicality). However, due to the lack of a track record of M&A transactions in this marina sector, we apply the same multiple that we calculated they paid for the acquisition of IGY Marinas.
- Used Boat Sales
They sell boats that they acquire through trade-ins from customers when they purchase new boats. It is observed that in years when the economy is not performing well, customers tend to opt more for this segment of used boats. The margins are lower, and it also results in higher floor plan requirements, which means higher interest costs compared to new boats.
- Brokerage
In this segment, it includes both the charter of catamarans through MarineMax Vacations in the British Virgin Islands, as well as the brokerage of superyachts through its two brands, Fraser Yachts Group and Northrop & Johnson (world leaders in this segment).
- Finance & Insurance
Cross-selling derived from their main activity, selling boats. It is a segment that, although not specifically broken down, has a 100% margin in their main competitor, as it is a commission-based service they offer to yacht buyers. It is a competitive advantage they have over the rest of the industry (along with $ONEW) because smaller players do not have enough volume to secure agreements with financiers on the same terms.
- Parts & Accessories
Mainly, marine engines and equipment are predominantly manufactured by Mercury Marine, a division of Brunswick, and Yamaha. All kinds of marine electronics, dock products, anchoring products, and water sports accessories are also available.
Others
As we can see, in the past three years, the focus has been more on growing in counter-cyclical segments such as marinas and repairs. Likewise, they are investing in technology, as it is a differentiator to provide a better customer experience (acquiring specialized companies like New Wave and Boatzon) compared to the average dealer without the level of resources of $HZO or $ONEW.
As you may have noticed, we are very interested in the marina sector because two factors are making them increasingly valuable. On one hand, there has been a boom in new boats in recent years (both superyachts, as discussed in the investment theses of The Italian Sea Group, San Lorenzo, and Ferretti, as well as boats under 20m, as mentioned in the Catana Group thesis). On the other hand, boats are becoming larger, and traditional marinas need to adapt or build new facilities.
For this reason, after conducting extensive research on the topic, we will share it with our subscribers in the coming weeks. We will explore not only the publicly traded companies, where we have found very few options (two pure players, one in Malta and one in Singapore), but also specific vehicles and opportunities that allow exposure to the sector.
But let’s delve into the details (compared to ONEW) because ultimately, whether an investment is good or bad depends primarily on the numbers.
Comparison with OneWater Marine $ONEW
MaxMarine and OneWater Marine are companies that have generated revenues of $2.3 billion and $1.857 billion, respectively, in the past 12 months, with net incomes of $158.2 million and $128.4 million, respectively. Therefore, we believe they are quite comparable. In terms of revenues, the main differences are that MarineMax has its own boat production lines (Intrepid and Cruisers, accounting for 10% of total revenues for $HZO) with a 3% higher operating margin, and the marina segment holds more weight.
Let’s discuss several relevant points: SG&A expenses, Same Store Sales, Business & Strategy, Capital Allocation & Management, Debt, Financials and relative valuation. Finally, we will provide our opinion, strategy, and next steps.
- SG&A
Marine Max had 3,410 employees vs 2,205 OneWater Marine, being the main difference the 933 vs 0 that Marine Max has in the yacht manufacturing operations division (Intrepid and Cruisers). The rest of areas are similar store level operations 2301 vs 1949 (Onew) and 176 vs 246 corporate administration and management.
Maybe the main difference comes from the CEO salary, where Mr Brett (Marine Max) receives $5.45MM annually ($0.85MM base salary, $2.77MM stock awards, $1.86MM non-equity compensation) and Mr Singleton $2.25MM ($0.75MM base salary + $1.5MM bonus)
Note: Marine Max numbers are from 2022, but 2020 and 2021 are 2.99MM and 3.97MM respectively
As you can suspect, there is an important reason behind it, and we understand that it also conditionates (at least partially) the capital allocation strategy
