Island Capital Group Questions MarineMax's Operating Strategy Amid Deteriorating Performance
Today, Island Capital Group LLC issued a third letter to the shareholders of MarineMax, Inc. (NYSE:HZO). The full text of the letter follows:
July 24, 2024
Dear MarineMax Shareholders,
I was gratified to read that MarineMax, Inc. (NYSE:HZO) ("MarineMax" or the "Company") publicly acknowledged that it had spoken with us several times. That is a correct statement. Unfortunately, however, none of our proposals, every one of which was materially accretive to shareholders, was met with any constructive response. There was no preparedness from management or the board to enter into a meaningful dialogue.
It is clear that the pecuniary interests of management and the board are not aligned with those of the Company's shareholders. Indeed, as noted in our last communication, the present value of MarineMax's management's compensation far, far exceeds any benefit that would be derived by them personally from a higher share price. They do not own an adequate percentage of the Company's stock for the sale of any part of the business to be economically compelling to them personally. As individuals, they make more money from the status quo.
According to MarineMax's definitive proxy statement for the 2024 Annual Meeting of Shareholders, as of December 18, 2023 (the record date for the Annual Meeting), compensation for senior management well exceeds $10 million per year, costing shareholders $50 million to $100 million of value at a time when the EBITDA run rate of the Company has fallen by more than $100 million. The stock price has fallen by more than 40% in the past three years.
Name and Principal Position |
Year |
Salary |
Bonus |
Stock Awards |
Non-Equity Incentive Plan Compensation |
All Other Compensation |
Total |
|||||||
|
|
|
|
|
|
|
||||||||
William H. McGill, Jr.
|
2023 |
$630,000 |
$62,738 |
$1,291,499 |
$630,000 |
$9,873 |
$2,624,110 |
|||||||
2022 |
630,000 |
|
976,544 |
1,151,799 |
8,570 |
2,766,913 |
||||||||
2021 |
600,000 |
|
479,994 |
1,200,000 |
8,315 |
2,288,309 |
||||||||
|
|
|
|
|
|
|
||||||||
W. Brett McGill
|
2023 |
975,000 |
|
3,802,488 |
1,218,750 |
9,900 |
6,006,138 |
|||||||
2022 |
815,000 |
|
2,771,009 |
1,862,532 |
9,150 |
5,457,691 |
||||||||
2021 |
740,000 |
|
1,442,985 |
1,776,000 |
13,000 |
3,971,985 |
||||||||
|
|
|
|
|
|
|
||||||||
Michael H. McLamb
|
2023 |
550,000 |
20,582 |
824,995 |
550,000 |
9,900 |
1,955,477 |
|||||||
2022 |
500,000 |
|
750,019 |
685,595 |
9,150 |
1,944,764 |
||||||||
2021 |
470,000 |
|
563,997 |
658,000 |
9,167 |
1,701,164 |
||||||||
|
|
|
|
|
|
|
||||||||
Charles A. Cashman
|
2023 |
490,000 |
|
906,490 |
367,500 |
9,900 |
1,773,890 |
|||||||
2022 |
425,000 |
|
786,152 |
582,755 |
9,150 |
1,803,057 |
||||||||
2021 |
395,000 |
|
473,958 |
553,000 |
9,467 |
1,431,425 |
||||||||
|
|
|
|
|
|
|
||||||||
Kyle G. Langbehn
|
2023 |
550,000 |
|
824,995 |
550,000 |
6,807 |
1,931,802 |
At some point one might expect that the various other stakeholders in the Company (e.g., secured and unsecured creditors, vendors, etc.) may get concerned as well, creating potential jeopardy. The best immediate strategy to prevent the Company from coming under such pressure would be to convert the YMRS Business (the combination of IGY and MarineMax's yachting and marina related services businesses, including Fraser Yachts and Northrop & Johnson) into meaningful cash proceeds. These proceeds could be used to reduce debt, return cash to shareholders and invest in its core retail business.
In addition to the above, we have been advised by one boat manufacturer that it intends to materially tighten the terms on which it provides inventory to MarineMax. This would likely further compress margins and decrease the variety of offerings provided by MarineMax to its existing and potential customers.
The Company has announced that it will release its fiscal third quarter financial results and conduct a conference call tomorrow (July 25th) at 10:00 a.m. Eastern Time. We believe that management needs to address the following fundamental questions and concerns:
- What synergies exist between the YMRS Business and the rest of the MarineMax portfolio and have any been realized since the acquisition closed in October 2022?
- What is the growth strategy for the YMRS Business, and what is the source of capital for that growth?
- Why won't management engage with Island Capital Group to entertain its proposal?
- The Company's stock price appears to have never benefited from MarineMax's ownership of the YMRS Business. Wouldn't monetizing these assets create more value?
-
Given EBITDA has declined by over 40% since FY 2022:
- Why wouldn't the Company seek to utilize the cash proceeds provided by Island Capital Group's proposal to reduce debt, return cash to shareholders or deploy accretively into its core retail business?
- What specific cost rationalization initiatives are the Company pursuing, and what are the timing and magnitude of those initiatives?
There are many other compelling reasons why shareholders should vocally express their desire to see MarineMax sell the YMRS Business. We will continue to explain the many, many reasons in future communications.
Thank you,
Andrew L. Farkas
Managing Member, Chairman & CEO
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