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Basis of Presentation (Policies)

9 Months Ended

Jun. 30, 2023

The preparation of Unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Unaudited Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates made by us in the accompanying Unaudited Condensed Consolidated Financial Statements include valuation allowances, valuation of goodwill and intangible assets, valuation of long-lived assets and valuation of contingent consideration liabilities. Actual results could differ from those estimates.

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 report our operations through two reportable segments: Retail Operations and Product Manufacturing. The change in reportable segments had no impact on the Company’s previously reported historical consolidated financial statements. Where applicable, all prior periods presented have been revised to conform to the change in reportable segments. See Note 17.

Consolidation

In order to provide comparability between periods presented, certain amounts have been reclassified from the previously reported consolidated financial statements to conform to the consolidated financial statement presentation of the current period. Specifically, goodwill was moved into a separate caption on the balance sheets. This reclassification had no impact on net income or retained earnings in either period presented. The Unaudited Condensed Consolidated Financial Statements include our accounts and the accounts of our subsidiaries. All significant intercompany transactions and accounts have been eliminated.

New Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-04 — Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations which is intended to enhance the transparency surrounding the use of supplier finance programs. The guidance requires companies that use supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period and associated roll forward information. Only the amount outstanding at the end of the period must be disclosed in interim periods. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The guidance becomes effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the roll forward information, which is effective for fiscal years beginning after December 15, 2023. We plan to adopt ASU 2022-04 in fiscal 2024. We are currently evaluating the impact that this standard will have on our consolidated financial statements.

The Company currently has no other material accounting pronouncements recently adopted or yet to be adopted as of June 30, 2023.

Revenue Recognition

The majority of our revenue is from contracts with customers for the sale of boats, motors, and trailers. We recognize revenue from boat, motor, and trailer sales upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance of the boat, motor, and trailer by the customer and the satisfaction of our performance obligations. The transaction price is determined with the customer at the time of sale. Customers may trade in a used boat to apply toward the purchase of a new or used boat. The trade-in is a type of noncash consideration measured at fair value, based on external and internal observable and unobservable market data and applied as payment to the contract price for the purchased boat. At the time of acceptance, the customer is able to direct the use of, and obtain substantially all of, the benefits of the boat, motor, or trailer. We recognize commissions earned from a brokerage sale when the related brokerage transaction closes upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance by the customer.

We do not directly finance our customers’ boat, motor, or trailer purchases. In many cases, we assist with third-party financing for boat, motor, and trailer sales. We recognize commissions earned by us for placing notes with financial institutions in connection with customer boat financing when we recognize the related boat sales. Pursuant to negotiated agreements with financial institutions, we are charged back for a portion of these fees should the customer terminate or default on the related finance contract before it is outstanding for a stipulated minimum period of time. We base the chargeback allowance, which was not material to the Unaudited Condensed Consolidated Financial Statements taken as a whole as of June 30, 2023, on our experience with repayments or defaults on the related finance contracts. We recognize variable consideration from commissions earned on extended warranty service contracts sold on behalf of third-party insurance companies at generally the later of customer acceptance of the service contract terms as evidenced by contract execution or recognition of the related boat sale. We also recognize marketing fees earned on insurance products sold on behalf of third-party insurance companies at the later of customer acceptance of the insurance product as evidenced by contract execution or when the related boat sale is recognized.

We recognize revenue from parts and service operations (boat maintenance and repairs) over time as services are performed. Each boat maintenance and repair service is a single performance obligation that includes both the parts and labor associated with the service. Payment for boat maintenance and repairs is typically due upon the completion of the service, which is generally completed within a short period of time from contract inception. We satisfy our performance obligations, transfer control, and recognize revenue over time for parts and service operations because we are creating a contract asset with no alternative use and we have an enforceable right to payment for performance completed to date. Contract assets primarily relate to our right to consideration for work in process not yet billed at the reporting date associated with maintenance and repair services. We use an input method to recognize revenue and measure progress based on labor hours expended to satisfy the performance obligation at average labor rates. We have determined labor hours expended to be the relevant measure of work performed to complete the maintenance and repair service for the customer. As a practical expedient, because repair and maintenance service contracts have an original duration of one year or less, we do not consider the time value of money, and we do not disclose estimated revenue expected to be recognized in the future for performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period or when we expect to recognize such revenue. Contract assets, recorded in prepaid expenses and other current assets, totaled approximately $5.9 million and $7.0 million as of September 30, 2022 and June 30, 2023, respectively.

We recognize revenue from the sale of our manufactured boats and yachts when control of the boat or yacht is transferred to the dealer or customer, which is generally upon acceptance by the dealer or customer. At the time of acceptance, the dealer or customer is able to direct the use of, and obtain substantially all of the benefits of, the boat or yacht. We have elected to record shipping and handling activities that occur after the dealer or customer has obtained control of the boat or yacht as a fulfillment activity.

We recognize lessor common area charges, utility sales, food and beverage sales and other ancillary goods and services. Performance obligations include performing common area maintenance and providing utilities, food and beverages, and other ancillary goods and services when goods are transferred or services are performed. Payment terms typically align with when the goods and services are provided.

Contract liabilities primarily consist of customer deposits. We recognize contract liabilities as revenue at the time of acceptance and the transfer of control to the customers.

We recognize revenue from service operations and slip and storage services over time on a straight-line basis over the term of the contract as our performance obligations are met. We recognize revenue from the rentals of chartering power yachts over time on a straight-line basis over the term of the contract as our performance obligations are met.

The following table sets forth percentages on the timing of revenue recognition:


	Retail Operations						Product Manufacturing
	Three Months Ended						Three Months Ended
	June 30,						June 30,
	2022			2023			2022			2023
Goods and services transferred at a point in time		91.2	%		88.1	%		100.0	%		100.0	%
Goods and services transferred over time		8.8	%		11.9	%		—			—
Revenue		100.0	%		100.0	%		100.0	%		100.0	%


	Retail Operations						Product Manufacturing
	Nine Months Ended						Nine Months Ended
	June 30,						June 30,
	2022			2023			2022			2023
Goods and services transferred at a point in time		90.5	%		86.9	%		100.0	%		100.0	%
Goods and services transferred over time		9.5	%		13.1	%		—			—
Revenue		100.0	%		100.0	%		100.0	%		100.0	%

The following tables set forth our revenue disaggregated into categories that depict the nature, amount, timing, and uncertainty of revenue and cash flows affected by economic factors.


	Three months ended June 30, 2022									Three months ended June 30, 2023
	Retail Operations			Product Manufacturing			Total			Retail Operations			Product Manufacturing			Total
New boat sales		72.3	%		94.8	%		73.5	%		69.3	%		93.1	%		70.8	%
Used boat sales		8.0	%		3.7	%		7.6	%		8.1	%		5.3	%		7.7	%
Maintenance, repair, storage, rental, and charter services		7.2	%		—			6.9	%		10.4	%		—			9.9	%
Finance and insurance products		3.2	%		—			3.1	%		2.9	%		—			2.8	%
Parts and accessories		3.8	%		0.8	%		3.6	%		4.5	%		0.9	%		4.2	%
Brokerage sales		5.5	%		0.7	%		5.3	%		4.8	%		0.7	%		4.6	%
Revenue		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%


	Nine months ended June 30, 2022									Nine months ended June 30, 2023
	Retail Operations			Product Manufacturing			Total			Retail Operations			Product Manufacturing			Total
New boat sales		72.3	%		96.2	%		73.5	%		68.5	%		95.6	%		69.9	%
Used boat sales		7.9	%		2.7	%		7.5	%		7.0	%		3.1	%		6.6	%
Maintenance, repair, storage, rental, and charter services		7.6	%		—			7.3	%		12.0	%		—			11.5	%
Finance and insurance products		3.1	%		—			3.0	%		2.9	%		—			2.8	%
Parts and accessories		3.3	%		0.7	%		3.1	%		5.0	%		0.6	%		4.8	%
Brokerage sales		5.8	%		0.4	%		5.6	%		4.6	%		0.7	%		4.4	%
Revenue		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The following table sets forth our maintenance, repair, storage, rental, charter services and parts and accessories revenue for our Retail Operations by location type.


	Three months ended		Three months ended
	June 30, 2022		June 30, 2023
	(Amounts in thousands)
Marina/storage locations	$	50,514	$	79,793
Locations without marina/storage		21,310		22,537
Maintenance, repair, storage, rental, charter services, parts and accessories revenue	$	71,824	$	102,330

	Nine months ended		Nine months ended
	June 30, 2022		June 30, 2023
	(Amounts in thousands)
Marina/storage locations	$	107,843	$	206,249
Locations without marina/storage		76,495		84,759
Maintenance, repair, storage, rental, charter services, parts and accessories revenue	$	184,338	$	291,008

Inventories

Inventories are stated at the lower of cost or net realizable value. The cost of inventories purchased from our vendors consist of the amount paid to acquire the inventory, net of vendor consideration and purchase discounts, the cost of equipment added, reconditioning costs, inventory deposits, and transportation costs relating to acquiring inventory for sale. Trade-in used boats are initially recorded at fair value and adjusted for reconditioning and other costs. The cost of inventories that are manufactured by the Company consist of material, labor, and manufacturing overhead. Unallocated overhead and abnormal costs are expensed as incurred. New and used boats, motors, and trailers inventories are accounted for on a specific identification basis. Raw materials and parts, accessories, and other inventories are accounted for on an average cost basis. We utilize our historical experience, the aging of the inventories, and our consideration of current market trends as the basis for determining a lower of cost or net realizable value. We do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions we use to calculate the lower of cost or net realizable value. If events occur and market conditions change, the net realizable value of our inventories could change.

- Definition

Disclosure of inventory accounting policy for inventory classes, including, but not limited to, basis for determining inventory amounts, methods by which amounts are added and removed from inventory classes, loss recognition on impairment of inventories, and situations in which inventories are stated above cost.

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