Twin Vee Powercats Co. (VEEE) is a designer, manufacturer, and marketer of recreational and commercial power boats, known for its innovative twin-hull catamaran designs. The company has weathered the challenges of the recent economic downturn, demonstrating resilience and a commitment to strategic investments that position it for long-term success.
Financial Overview
For the fiscal year ended December 31, 2023, Twin Vee reported annual revenue of $33,425,911, a decrease from the prior year. Despite the revenue decline, the company maintained a strong balance sheet, with annual net income of -$7,192,176 and annual operating cash flow of -$6,934,773. The company's annual free cash flow stood at -$12,097,251, reflecting its strategic investments in product development and infrastructure.In the first quarter of 2024, Twin Vee experienced a significant reduction in demand for its products, in line with broader industry trends. The company's net sales decreased by 41% to $5,276,343 for the three months ended March 31, 2024, compared to $8,877,215 for the same period in the prior year. The number of boats sold during the first quarter of 2024 decreased by 39% compared to the first quarter of 2023.
Gross profit for the first quarter of 2024 decreased by 83% to $277,314, with gross profit margin declining from 18% in the prior year period to 5% in the current quarter. This was primarily due to a shift in the product mix, with the company's new monohull line of boats having a lower average selling price compared to its traditional catamaran models.
Business Overview
Twin Vee has organized its business into three operating segments: gas-powered boats, electric-powered boats, and franchises. The gas-powered boat segment, which includes the Twin Vee and AquaSport brands, is the company's core business, manufacturing and distributing gas-powered boats to a network of independent dealers.The electric-powered boat segment, operated through the company's publicly traded subsidiary Forza X1, Inc., is focused on designing and developing a line of fully electric boats. While the electric boat segment has experienced slower-than-expected growth due to broader industry trends, Twin Vee remains committed to this strategic initiative, leveraging its technological advancements through strategic collaborations and partnerships.
The franchise segment, developed through the company's wholly owned subsidiary Fix My Boat, Inc., is aimed at establishing a standard product offering and selling franchises across the United States. This segment is currently in the early stages of development and has been relatively inactive in 2023 and the first quarter of 2024.
Operational Initiatives
To address the challenges posed by the current economic environment, Twin Vee has taken proactive measures to rightsize its operations and reduce cash burn. The company has implemented cost-cutting initiatives, including significant reductions in production labor and discretionary spending, which have favorably impacted its results of operations.Despite the headwinds, Twin Vee is continuing to invest in exciting new product developments. The company is redesigning, reimagining, and retooling its popular GFX line of Powercats, introducing the brand-new GFX2 models. These technologically advanced boats are expected to have higher margins and have already generated strong interest, with the 400 GFX2 model selling 10 units so far, exceeding the company's initial projections.
In addition to the GFX2 models, Twin Vee is also developing a new 44-foot Twin Vee model and the AquaSport 280 Superboat, further expanding its product portfolio and addressing the growing demand for larger, higher-margin boats.
To support its production capabilities, the company has begun construction on a 30,000 square foot addition to its Fort Pierce, Florida facility, which will bring its total manufacturing space to over 100,000 square feet. This expansion is expected to increase the company's annual production capacity to 700 units, positioning it to capitalize on the anticipated market rebound.
Liquidity and Capital Resources
As of March 31, 2024, Twin Vee had $17,381,000 in cash, cash equivalents, restricted cash, and marketable securities, a decrease from $21,218,000 as of December 31, 2023. The decrease in cash reserves was primarily due to Forza X1's research and development, plant construction, and costs allocated for new product development, as well as operational cash losses from reduced revenue in the first quarter of 2024.Despite the current economic challenges, Twin Vee maintains a strong balance sheet, with $9 million in working capital, including inventory, and $3 million invested in property, plant, and equipment. The company has a small COVID-era stimulus loan of $500,000 and no bank debt, providing it with financial flexibility to navigate the market conditions.
Outlook and Risks
While the company cannot predict the future with certainty, Twin Vee is focused on executing its strategic initiatives to position the business for long-term success. The company's investments in new product development, manufacturing capacity, and cost-cutting measures are expected to enhance its competitiveness and profitability as the market rebounds.However, the company faces several risks, including the potential for continued economic uncertainty, increased competition for dealers, and the successful execution of its product development and manufacturing plans. Additionally, the company's ability to maintain its Nasdaq listing is an ongoing concern, as it recently received a notice from Nasdaq regarding its failure to maintain the minimum bid price requirement.