Used Boat Prices Falling

[skurfer]

On 10/7/2022 at 3:34 PM, IXFE said:

Inventory be stacking… 

That boat went to CO!!

[skurfer]

Good read IX, One thing you guys need to consider with the price increases, 30-40% in recent memory. Have the flooring lines increased to keep up with the prices? 

Here are the numbers from a big bank economist for towboats:

2018 - +11%

2019 - +5% (cold/wet spring noted)

2020 - +24% (COVID run on all things outdoors)

2021 - -2% (FTBBs normalize, inventory scarcity weighs in)

2022 - -4% (Tough comps and supply chain limit retail)

2023 - 0% (Expect this number to be revised downward)

[OtherBoatisaCessna]

12 hours ago, IXFE said:

I actually pointed this out (don't blame you if you missed it in that novel) when I referenced avg selling price (not avg. cost which is something different and can't be calculated with the data I provided).  Yes, ASP is growing!  I almost included this in the table, but I didn't because it's a bit misleading... the single biggest driver in the growth of avg. selling price are the acquisitions of Pursuit and Maverik (i.e inorganic growth).  True, the ASP of Malibu/Axis has also grown organically (driven by price increases, mix shift to bigger models, and people choosing more options), but the only way to know what that looks like would to isolate Malibu/Axis revenue, which they do not report.  

You are spot on with your EBITDA comment.  It's even more evident if you look at Gross Margin % (not on my table). It's been +/- 25% for 10 years.  In fact, that's the reason I first started the "MBUU by the numbers" thread so long ago... to demonstrate to folks that the price increases (which looking back were really child's play compared to today) were perfectly correlated to the cost to BUILD the boats.  It's simply not the money grab most folks like to imagine.

Your last statement needs refinement, imho.  They absolutely WERE driven by volume (aka market share) until their capacity was constrained and they could no longer play that game (factory closed on 3/24/20 and has never really been the same)... only then did they pivot to price (they actually waited until MY22 pricing released in July 2021), which you and I agree is totally understandable (from a business perspective, even though it sucks as a boat buyer).  

Very nice string of posts, @IXFE.  I copied your whole post but I’m only really intending to reply to your comments on the money grab (would edit but on mobile), and that is to say… I think I’d still put 25% EBITDA margins in “money grab” territory hahah!  That’s pretty damn impressive.  

[IXFE]

2 hours ago, OtherBoatisaCessna said:

Very nice string of posts, @IXFE.  I copied your whole post but I’m only really intending to reply to your comments on the money grab (would edit but on mobile), and that is to say… I think I’d still put 25% EBITDA margins in “money grab” territory hahah!  That’s pretty damn impressive.  

Thanks for your kind words. I should clarify. 

Gross Margin is 25% (and has been for years), not EBITDA.  Gross Margin only accounts for the cost to actually build the boats (materials + labor). It does not include any expenses related to Research & Development, Sales & Marketing, or General & Administrative. That’s why I always like to use Gross Margin % to make the point about the cost to build boats rising as fast as the prices we see to buy them. 

EBITDA bounces around between 17% - 20% and it factors in all that other spending. 

These levels of profitability are far from “money grab” territory. You should research some of the other companies you’re giving your $ to. 

[shawndoggy]

11 hours ago, skurfer said:

Good read IX, One thing you guys need to consider with the price increases, 30-40% in recent memory. Have the flooring lines increased to keep up with the prices? 

Here are the numbers from a big bank economist for towboats:

2018 - +11%

2019 - +5% (cold/wet spring noted)

2020 - +24% (COVID run on all things outdoors)

2021 - -2% (FTBBs normalize, inventory scarcity weighs in)

2022 - -4% (Tough comps and supply chain limit retail)

2023 - 0% (Expect this number to be revised downward)

@skurfer are those percentages price increases or units moved or just overall revenue?

[Five Cent Worth]

1 hour ago, IXFE said:

These levels of profitability are far from “money grab” territory. You should research some of the other companies you’re giving your $ to. 

I.E. run his table on say... Pfizer.... 

[skurfer]

2 hours ago, shawndoggy said:

@skurfer are those percentages price increases or units moved or just overall revenue?

Towboat units sold

 

[OtherBoatisaCessna]

10 hours ago, Five Cent Worth said:

I.E. run his table on say... Pfizer.... 

Sure but they capitalize a lot of R&D expense, it’s a little different.  Not that they’re my favorite company these days…

[Five Cent Worth]

9 hours ago, OtherBoatisaCessna said:

Sure but they capitalize a lot of R&D expense, it’s a little different.  Not that they’re my favorite company these days…

They might.  But even with moving things to buckets that most traditionally don't - they sure are well above the 15-20% EBITDA most are aiming for.....

Edited October 26, 2022 by Five Cent Worth

[justgary]

On 10/25/2022 at 1:28 PM, Five Cent Worth said:

I.E. run his table on say... Pfizer.... 

Pfizer's roughly 3.47% dividend may not be as high as Verizon's, but at least they let the owners in on the action.

MBUU doesn't pay a dividend.

[The Hulk]

Anyone else noticed that more dealers are getting a bit nervous and slashing used prices quite a bit lately? 

Sentiment is getting ugly quick after talking to a few places.

Shipping vessels from Asia to US has dropped off planet earth, typically a 6-9mo indicator of future demand for our economy 

FedEx grounding planes, shipping vessels adding more blank sailings. Now Amazon boss man basically telling people they should hold off on buying stuff..  Not sure how many folks realize whats coming down the pipeline. 

Oddly, a lot more respectable lake houses, and lots have come on the market than the past several years and none are moving.. they would have been considered a steal past few years, albeit high for pre covid.. 

I think there are going to be crazy deals on used boats by summer, and even better next fall! 

 

 

 

 

 

[OtherBoatisaCessna]

Well, I’m definitely not rooting for a market collapse since I just jumped in, but I haven’t failed to notice that our local dealer’s inventory, which was only one page long during the time I was trying to feverishly buy this summer, is now eight pages long…

 

 

[RCorsa]

Yep the crash is inevitable.  I recently played golf with a CEO of a regional bank who was just on CNBC and he explained that after 3 years of banner profits for mass produced luxury goods, the new high interest rates and corporate slowdowns will lead to reduction in work force and an absolute recession which he said is healthy for the economy in then long term.  

 

However, dealers are for sure starting to panic as they have be living high and suddenly they have much more inventory they are paying bridge loans on.  Winter is always slow for luxury boats and cars for obvious reasons but this winter will be much worse.  That said, if you have cash and want/need a boat for next summer just wait 60 days and you'll find some amazing deals....

[Cole2001]

You guys are likely right and it makes me wish I got out of my 22 at the end of the season when the market was stronger. I think the one thing that might hold the used market strong is the new boat prices, the increases for 23 are astronomical. 
Where I’m mostly seeing a change is the lower end market, the sub 100k boats. The buyers spending 250k plus are likely going to get a new boat anyways. 

[oldjeep]

1 hour ago, OtherBoatisaCessna said:

Well, I’m definitely not rooting for a market collapse since I just jumped in, but I haven’t failed to notice that our local dealer’s inventory, which was only one page long during the time I was trying to feverishly buy this summer, is now eight pages long…

 

 

Some of that is that the new boats are starting to come in.  Local dealer inventory always starts showing high this time of year, especially since they post all the stock boats they have ordered even before they get them.

[wedge88]

We've been shopping for a new camper and we're seeing 25%+ off MSRP and the dealer I spoke with on Tuesday said "make an offer" as the lot is stuffed and much of it is 2022 inventory.  I'm going to hold until spring as I think it's just going to keep dropping.

[Murphys]

5 minutes ago, wedge88 said:

We've been shopping for a new camper and we're seeing 25%+ off MSRP and the dealer I spoke with on Tuesday said "make an offer" as the lot is stuffed and much of it is 2022 inventory.  I'm going to hold until spring as I think it's just going to keep dropping.

I've traveled to Florida and North Carolina recently. All of the RV dealer lots I passed were packed with inventory. Much different than what was seen the previous couple of years. 

[wedge88]

15 minutes ago, Murphys said:

I've traveled to Florida and North Carolina recently. All of the RV dealer lots I passed were packed with inventory. Much different than what was seen the previous couple of years. 

Yep, and the dealer said the factories just keep shipping out inventories that they didn't even have on order.  We're looking at a higher end TT that really wasn't in contention because I thought it was out of budget.  Our primary use is at our farm late summer though December with a handful of trips to local sports tournaments to avoid hotels so I didn't want to spend $50-$60K based on our usage needs but the options are definitely opening up in the luxury/premium series.  

[Hemmy]

45 minutes ago, wedge88 said:

Yep, and the dealer said the factories just keep shipping out inventories that they didn't even have on order.  We're looking at a higher end TT that really wasn't in contention because I thought it was out of budget.  Our primary use is at our farm late summer though December with a handful of trips to local sports tournaments to avoid hotels so I didn't want to spend $50-$60K based on our usage needs but the options are definitely opening up in the luxury/premium series.  

There is a lot of 22 inventory sitting in the yards of most RV manufacturers.  The show that is put on by the manufacturers in September got some orders from dealers, but most of them don't want the units until March.  Almost everybody is shut down all next week and some for 2 weeks and also at least 2 weeks during Christmas and New years.  Some are shut down for 4 weeks during Christmas.  It is common to take a 2 week shut down during Christmas but not usually more than 2 weeks and also not usually 1-2 weeks at Thanksgiving.
The way the New year is starting out, we will most likely be below a "normalized" run rate pre-covid.  2019 was steady, but it wasn't great.

[Michigan boarder]

Anecdotal for sure, but I am surprised to see that we have a brand new freshly built Response that will be our team boat, already delivered and getting prepped.  It's interesting to think that the factory took line time out to build a direct drive, which tells me that there is a lull in the V-drive demand.

[Jhucke]

32 minutes ago, Michigan boarder said:

Anecdotal for sure, but I am surprised to see that we have a brand new freshly built Response that will be our team boat, already delivered and getting prepped.  It's interesting to think that the factory took line time out to build a direct drive, which tells me that there is a lull in the V-drive demand.

Pics?

[Michigan boarder]

23 minutes ago, Jhucke said:

Pics?

Haven't seen it yet

[oldjeep]

57 minutes ago, Michigan boarder said:

Anecdotal for sure, but I am surprised to see that we have a brand new freshly built Response that will be our team boat, already delivered and getting prepped.  It's interesting to think that the factory took line time out to build a direct drive, which tells me that there is a lull in the V-drive demand.

The direct drives usually get built pretty early on don't they?  Since a lot of them are promos

[Michigan boarder]

1 minute ago, oldjeep said:

The direct drives usually get built pretty early on don't they?  Since a lot of them are promos

I don't know.  They didn't have a 2021 for us to use for that season and last winter sold the 2019 model that we'd been using for like $40k over list.  

[The Hulk]

Indicators of what's to come . Normally a busy time pre holidays 

 

Edited November 18, 2022 by The Hulk