Good day, ladies and gentlemen. Welcome to the MarineMax 2015 Fiscal Year and Fourth Quarter Earnings Conference Call. Today's call is being recorded. And now for opening remarks and introduction, I'd like to turn the conference over to the Mr. Brad Cohen. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining this discussion of MarineMax's 2015 Fiscal Year and Fourth Quarter Results. I am sure that you have all received a copy of the press release that went out this morning. But if you have not, please call Linda Cameron at (727) 531-1700, and she will email one to you right away. I would now like to introduce the management team of MarineMax, Bill McGill, Chairman, President and Chief Executive Officer; and Mike McLamb, Chief Financial Officer of the company. Management will make some comments about the quarter and then be available for your questions. With that, let me turn the call over to Mr. Mike McLamb. Mike?

Thank you, Brad. Good morning, everyone, and thank you for joining this call. Before I turn the call over to Bill, I'd like to tell you that certain of our comments are forward-looking statements as defined by the Private Securities Litigation Reform Act. These statements involve risks and uncertainties that may cause actual results to differ materially from expectations. These risks include, but are not limited to, the impact of seasonality and weather, general economic conditions and the level of consumer spending, the company's ability to capitalize on opportunities or grow its market share and numerous other factors identified in our Form 10-K and other filings with the Securities and Exchange Commission. With that in mind, I'd like to turn the call over to Bill.

Thank you, Mike, and good morning, everyone. As we look back on fiscal 2015, our team did an outstanding job driving top line and earnings growth. The improvement came from steady market share gains and from the significant brand and segment expansions, which we completed during the downturn. I'm very proud of the hard work our team does every day, exceeding our customers' expectations as they vote with family and friends. This customer-centric approach is fundamental to our core operating philosophy and is, ultimately, what drove the growth and will keep propelling us ahead in the future. We ended the year with a strong fourth quarter as same-store sales increased over 17%. This strong double-digit increase follows a 10% increase last year. The growth, coupled with strong expense management, resulted in comparable pretax earnings increasing of over 50%. Margins were impacted mostly by greater used boat sales. Additionally, with the rise in new boat sales, our higher-margin business is strength modestly as a percentage of revenue. However, consolidated margins sequentially improved again, and we believe that margins have the potential to improve on an annual basis as more new models arrive coupled with generally improving industry conditions. As we have stated throughout this economic recovery, new innovative products sells. As our manufacturers get us new models, the demand continues to be robust. All of our manufacturing partners are stepping up their new product development efforts after years of limited investment. It is great to see the products and the demand the new models are generating and giving customers with aged boats a reason to trade. Certainly, the new models are contributing to our growth and market share gains. Together with our customer-centric approach, pricing strategy, our focus on premium brands, the training we provide our team and customers and our…

Thank you, Bill, and good morning, again, everyone. For the September quarter, our revenue increased to just over $189 million, driven by strong same-store sales growth of 17%, which is on top of 10% same-store sales growth last year. The quarter started with a strong July and ended with an even stronger September relative to the prior year. The same-store sales growth was over 80% unit-driven, with a modest contribution from average unit selling price. As far as geographic comments, Florida, New York, Texas and the Midwest were the strongest. For the quarter, we grew gross profit dollars over $5 million, but our gross margin decreased from last year, as Bill mentioned. Let me add that our new boat margins did increase year-over-year for the second consecutive quarter, but the impact from mix led to the year-over-year consolidated margin decline. Selling, general and administrative expenses were over $41 million for the quarter. Excluding the $1.6 million gain in last year's fourth quarter, comparable SG&A as a percentage of revenue improved to 22% from 23.4%. For the quarter, interest expense was up slightly year-over-year as a result of increased borrowings from additional inventory to support the growth in sales. As for taxes, given our increased earnings and the improving industry conditions, we concluded that most of our deferred tax assets that were fully reserved in the downturn would be realizable. The accounting for this reversal of the reserve results in a tax benefit of over $27 million. Another implication of this is a very large increase to our tangible net worth as the asset is now reflected again on our balance sheet. Further, it's important to note that MarineMax will be providing a tax provision or expense in the future. However, we are not expecting to pay significant dollars until we…

Thank you, Mike. Another positive fiscal year is complete, and our team worked very hard to drive the results and position us to capture additional growth in earnings as we move forward into fiscal 2016. To that point, typically, one of the largest shows in our industry starts this Thursday in Fort Lauderdale, and you can be sure that we have a large presence with over 100 units displayed and 11 different venues. Crowds and sales at the earlier shows in September and October have been encouraging. So we look forward to a great weather and sales at Fort Lauderdale. Looking back at the last few years, our revenue is gaining significant momentum with no material acquisitions to speak of. We talked about the brand expansions that are paying off. Our new unit growth has been very strong over an extended period of time, and we expect that to continue with the increased momentum of new product investment. We are more bullish today about a steady and sustained recovery than a year ago, thus the return to earnings guidance for 2016. Overall, the response to the branded segments that we operate within have been positive and the customer continues to seek new products, which is a driver of the ongoing recovery. That said, it is critical that consumer confidence remains positive and innovation from the manufacturers continues as we progress our way to historical levels of revenue and earnings. At MarineMax, we continue to work to stimulate consumer interest and, ultimately, sales. We remain focused on driving repeat business, while attracting new customers with broad and diverse range of products. Our approach is the key differentiator for us, and we will continue to drive our growth through the selective expansion of brands and accretive opportunities as they emerge. We also…

[Operator Instructions] We'll go to Ben Bienvenu with Stephens.

So just -- Mike, in line of your commentary around October being ahead of last year, is that in reference to units or total revenue? And then can you remind us of the cadence of sales in 1Q of this last year?

Yes. It'll be both units and total revenue are ahead for October last year. Last year's December quarter was one pretty atypical momentum build all the way through the December quarter. So usually, our business drops significantly around the holidays and last year, it plowed right through to 12/31 and then right through the new year. So we're up against a tough quarter. Certainly, October is a great month out of the gate. We are ahead, we have positive same-store sales growth, but we need to really perform in November and December, and the team's going to do all they can to do it. But I think it's prudent to think that comps will be down in the quarter, we'll probably lose a little money in the quarter.

Fair enough. And then Bill, I think on the last call, you referenced some of the new Sea Ray 65 starting to show up. How is that product making its way to your dealers? Sort of what's the velocity of that? And is your outlook for the lion's share of the new units making its way to your dealers still through the back half of FY '16?

We're encouraged by the new products and the sales have been strong. And we do have a backlog of 65s and 59s. And we're seeing progress towards getting the product earlier to the customers. We are also having great success with Azimut with some of their new products. And Ocean Alexander is important to us now, and they've got a new 70-footer that's coming out. So I think there's a lot of encouraging things for next year. The Fort Lauderdale show, which starts day after tomorrow, is a pretty important show for us because that is normally larger products that are sold there. And so it'll help set the stage for 2016. So we still have that ahead of us. So we'll know better after next Monday exactly how that went. But all in all, consumer confidence being over 100, and hopefully, that'll continue to progress. I think there's some very good signs for next year.

Great. And then maybe just lastly. Looking at some of the nonboat sales service warranty, can you talk about your expectation for the attach rate and sales growth of those categories and maybe what that looks like in the most recent quarter?

Yes. I can comment. I mean, all those businesses are doing fine. They're healthy, some more directly increase or decrease with sales like F&I or brokerage or things like that. Service and parts and accessories have a hard time keeping up with a 22% annual growth rate, which is a good thing. It tells you the product quality is pretty good. You wouldn't want your service and parts to necessarily keep up. And so that does pressure margins mix just a little bit. But generally, those businesses are healthy and doing what they're supposed to be doing.

We continue on to Jimmy Baker with B. Riley.

This is Austin on for Jimmy. When do you guys expect to get back to the gross margin percentage range posted 2012 through 2014? And how's your outlook on new boat margins or mix change that view?

I've comment -- we commented the last 2 quarters, our new margins have actually been up year-over-year. Our issue, I think, of late has been -- when you look at the first half of this year, we had 35% same-store sales growth in the December quarter and in the March quarter. Those are quarters Bill just said it. Those are quarters that are hinged on big boats because of Fort Lauderdale Boat Show and the Miami Boat Show. So we had -- which means we're taking more trades. When you're selling bigger boats, you're taking more trades. So as we started the season, which is the June quarter to September quarter, we had an elevated level of used boats. And maybe Bill and I should have guided a little bit that hey, we're going to have an increase in used boat sales, which carry a lower margin, but it's hard to predict when things sell.

And then you could also add to that, Austin, that those -- that used boat inventory that we had are normally older than they would have been historically. And so you're getting trades that are 8, 10, 12, 15 years old. Because of the downturn, they weren't traded earlier. And in a lot of cases, we wholesale them out. So we recognize the revenue, but there is very little...

Zero.

Very little income, if any, on it. But it's the prudent thing to do because a 15-year-old product is harder for us to support with everything we do for the customer. So that's probably the biggest impact that hit us this last year on the used margin was the fact that we wholesaled a lot of boats. And as such, it was because of the aging of the trade-ins.

So fundamentally, it's news going in the right direction, which it is, as we work through some of the challenges Bill mentioned around wholesale. I mean, I think the opportunity is there in 2016 to have the margin tailwind that we would all expect. Our guidance does not assume a whole lot of that. And I think prudently, we haven't had -- the last 4 quarters in a row, gross margins consolidated have come down on a year-over-year basis. So until we actually start seeing things going in the right direction, we're not going to change your guidance until we see that. So that's what's baked into our guidance. It's not a whole lot of improvement in the gross margin on a year-over-year basis yet.

Okay, that's helpful. And where do you think the net impact of lower fuel prices have been or will be to your new boat sales?

Well, I mean, obviously, lower fuel prices helps us, and it's a positive as far as the feeling that customers get, that hey, I can pay less for fuel, I can take a little longer trips, do that type of thing. I don't think it impacts the decision a whole lot. I think it helps the consumer feel a little bit better. But at the end of the day, the cost of fuel is not the deciding factor on boating or the purchase. But for sure, it's good news. And I think on some of the smaller boats in particular, it's aided in some of the sales. But hopefully, it will continue to stay low. But more important than that is consumer confidence, and the feeling that the consumer has about the future is really the biggest driver of our success and with our discretionary item -- thing called boating.

Okay. And then just one more from me. Can you give us an update on your acquisition outlook? And are you in any active discussion that you might expect to lead to a deal this off-season?

We've been in active discussions for quite a while. It's -- acquisition, I almost hate the word, because it's really -- you're merging a company and you are acquiring them, but at the end of the day, what we're looking for is the market and the people more than any other single thing. And so in doing that, when the acquisition is complete, everybody's got to feel good about it. Even though there's compromises perhaps on each side a little bit, there can't be a lot. And so it's got to be right for both the people joining us and also the right for MarineMax and our shareholders. So it's delayed us doing some acquisitions that perhaps we could've done in 2015 or earlier. And so we are in active discussions is probably the best way to describe it, and we'll announce them when they make sense.

As their earnings come up, Austin, just like ours has come up, it makes it easier to get deals done versus when they're close to breakeven. So the further away from 2008, 2009, the more likely we'll get back to our acquisition cadence.

And we'll go to James Hardiman with Wedbush Securities.

Really appreciate the guidance here. I'm assuming you took that step based on just looking at consensus numbers. So just help me understand, Mike, I'm sure you've sort of seen a consensus number. The street is looking for about 10% growth. It seems like you're guiding pretty close to that. And then you threw out an operating leverage number. Maybe you can help us translate that. Street's looking for about 25% gross margin, SG&A in the $170 million range. Somewhere around the margin front, it seems like the Street is maybe a little bit too optimistic. Which of those do you think is too aggressive? And then on the tax front, just so I understand, $38.5 to $39 is what your $0.60 to $0.70 is based on. But do we -- is that going to be the actual tax rate or do we have to sort of wait and see to see how that plays out?

I would -- on an annual basis, that should be our tax rate. In any given quarter, it can move around a little bit, but on an annual basis, that should be it and it shouldn't move around a whole lot any given quarter. And keep in mind, we're not going to pay taxes until we absorb all those NOLs and deductions. What's baked into our guidance? So we have generalized and generally said, hey, if you generate $1 of revenue, you ought to have about 15% of that dollars that flow through to the pre-tax line. But that 15% is sort of a target or a middle, there's a range, 12%, 17%. In the current year, our flow-through was a lot worse than that -- or less than that, I should say. So you take that range of 12% to 17%, MarineMax, coming off the year, we just came off of, which wasn't the best flow-through year, we're in the low end of that range for our guidance. The Street's going to be closer to the middle of the range. That's the primary difference between us and the Street. Plus I'm not sure everybody in the Street is a fully taxed number is yet. I think everybody's close, but I'm not sure if they're fully taxed. So that's the difference between where our numbers are and where the analysts are, James.

That's very helpful. And then over the last 4 quarters, you've given us all of this, but just -- maybe so we're on the same page. Can you may be call out in some of the quarters which were the items that affected -- sort of unusual items that affected that flow-through number? If I recall -- where there some health care costs earlier in the year and then there were some promotional costs in the March quarter, if I recall correctly. Can you just remind us so that we're on the same page as we think about quarters?

Yes, I can. Let me start by saying on an annual basis, on 12 months, if you look at 2015 to 2014, we actually had pretty darn good operating cost leverage. Using that 15% target, if you look at our growth in revenue and then if you take out the gains from last year and the gains from this year, our operating costs were pretty good. And in any individual quarter, they may have been an increase or reduction in cost. But on an annual basis, the operating cost was pretty good. Where we have struggled is the gross margin line on an annual basis and then really throughout the year, that's where we struggled. In the December quarter, we had a spike in big boat sales. And when I say big boat, above 75 feet, 80 feet or bigger. Those carry low double-digit margins, 10%, 11%, 12%. So that drove our margins down. That's what we talked about in that quarter. In the March quarter, we had elevated marketing costs and elevated health care costs to your point. Now I will tell you on an annual basis, we made up those costs basically. But in the March quarter, we had elevated costs. And then we also had a mix of older Sea Ray product -- to be replaced Say Ray product selling, which drove down gross margins. So now that's the second quarter where margins dropped and expenses were higher in that quarter. In the June quarter, it was a lot of these trades selling that we talked about from the December and the March quarter growth that we had of 35%. Those then sold in the June quarter, which hurt our consolidated margins because used boats and also wholesale boats, to Bill's point, carry lower margins than new boat sales within other margin businesses. Cost leverage in that quarter was pretty decent in the June quarter. In the September quarter, we got a little bit of a tail of used boats selling through. Costs were pretty good. We had some elevated marketing costs, some elevated commissions. But generally, costs were pretty decent. And that kind of wraps up the year. If you look at 2014, we had good margins and very good flow through. So we've had some challenges here in '15 that we certainly are working hard to overcome.

That is extremely helpful. And then I guess last question on the ASP front. Once again, over the course of last year, it was extremely choppy. First quarter, so the December quarter, you got a huge ASP benefit or ASP growth, I guess, I should say from the big boats. You've guided to some ASP growth this year. Is it safe to say that December ASP should be down just given that the huge influx of big boats in last year's December quarter? And then we'll sort of make that back up and more over the remaining 3 quarters or how should we think about that?

Yes. That's what I would expect because you're right. Our 45% growth we had in the December quarter, if I remember right, about half was unit-driven and half was ASP-driven, which had to be a big bump on ASP if you think half of 45%. I would say on an annual basis, and I said it in the prepared remarks, our 22% same-store sales growth is close to 70% or maybe just slightly less unit-driven. So we've had a very strong unit year, very strong unit fourth quarter, which is to me, that's really, really good news, especially as our manufacturing partners are coming out with new models, including new smaller boats from Sea Ray. It's nice to see the health of the industry. I see the health of the industry more in units than in a handful of big boat sales.

And we'll go to our next caller, Joe Hovorka with Raymond James.

Just one question. So your inventory that you have at the end of the year to $270 million or whatever it was, how much of that is used inventory now? And then what was that same number last year at this time?

You know what, Joe, I don't remember the exact dollar. I do know used inventory is down. I wanted to point that out. So it's down year-over-year. If I was -- educated guess, I'm going to say it's $35 million to $30 million, something like that.

I think that's about right, it's in the 30s.

Yes, but I don't remember exactly.

And it's fresher inventory than probably we've had in a long, long time.

You mean the used inventory specifically is fresher?

Both. New and used.

We'll continue onto Mike Swartz with SunTrust.

Just wanted to ask a question on the guidance. Maybe asking it in a little different way than James did. But -- and Mike, I think you said your EPS range is kind of predicated on the lower end of your kind of that long range flow-through assumption we've talked about in the past. And I guess, the question is, is there a reason structurally we should think about it being at the lower end, maybe in '16 and going forward? Or is -- are you just being a little conservative after some of the issues or items that we've seen in the past year?

Well, so our flow-through rate in 2015, if you do all the math, was 8%. So 12% would be a 50% increase to 8%. So we've got to improve the business. But fundamentally, Mike, no, nothing should have changed fundamentally. We ought to have the ability over time to get back to the right flow-through. Just sitting here today, coming out with guidance, we think, it's the prudent thing to be on the lower end of the range, especially given it's a massive increase from where we just finished '15. And -- but that's not a single, but fundamentally, there's something that's changed in the business.

And then are you assuming any uses of cash in that guidance? Share buybacks, anything like that?

No. I mean we have our normal CapEx and stuff like that. But there's no material change to the denominator of stock. There's no acquisition, stuff like that.

Okay, that's helpful. And then on the commentary around the -- what you've seen thus far in October and maybe how we should think about December. Does the timing of Fort Lauderdale being a week later this year have any impact on kind of either of those items?

It's kind of funny, I meant to bring that up when Bill was talking because October, while we probably didn't close many deals last year in October, we would've closed some, and the fact that our backlog is up this year with Fort Lauderdale being a week later is interesting. I think that would be maybe a more positive comment, potentially. Still, we got a lot of work cut out for us. We're up against a tough quarter, but that is interesting. For those on the call who don't know what Mike's indicating, October -- Lauderdale is normally held before Halloween every year right around it. This year, it moved out 8 or 10 days. And so last year, when we closed October, we would have potentially had some revenue and also backlog related to Lauderdale, which we don't have this year.

But we have one last week in order to deliver boats that we perhaps sell at the Fort Lauderdale boat show. So it could impact the December quarter a little bit by it being delayed.

Got you. And then just finally, on this whole aspect of the used boat mix and understanding that it's lower ending this year. I guess, what kind of visibility do you have into that over the next couple quarters? I mean, is it predicated on what you see coming out of Fort Lauderdale and Miami? Is that something we'll have a better sense of in, say, February?

Fort Lauderdale and Miami definitely are major, major shows that will drive our used inventory availability as our -- like in New York show and some other ones. We have very limited visibility, Mike, until we get through it for good or for bad, we never have. I suspect because of the success we've had in the last several years, beginning to sell models, we'll have less and less of the wholesale buzz that Bill talked about, it'll be on a more normal percentage of wholesale versus maybe slightly elevated levels that we've seen of late.

[Operator Instructions] We'll go to David MacGregor with Longbow Research.

Just looking back to last call, Bill. You had thought, from a timing standpoint, getting a lot of the new product in 2016 would start to come through in March and you'd have a heavier presence in new products in the June quarter. Is that changing now? And if so, how?

Yes. David, it is what happened. What I'd predicted did happen. We started to get more new product and it helped, especially with some of the smaller product, Sea Ray, which really helped our unit growth. But we also saw it from Whaler, and there's a backlog right now of the Whaler 42s and same with the Scouts. The larger Scout product, et cetera, that it still has come through. But -- so we're not getting product -- the cadence we'd like to still get it. I mean, obviously, we'd like to get it and deliver it that week. But it's getting better and better. So I think we'll have less of a challenge going forward in 2016 as the manufacturers have ramped up and are starting to get it out. But the demand for the new product, and this is really the important point, the demand for the new product is very, very strong. And that's great news. But ideally, we'd like to get it sooner if we could. And of course, the manufacturers are working on that.

So I realize the seasonal pattern here, obviously. But are you now expecting maybe a slightly better March quarter than you might have a quarter ago?

Yes. Understanding that maybe December won't be what it was last year, which I think we've said. Because maybe timing of some bigger boats with Lauderdale being delayed a week and just who knows when some of these products will close. Significantly, it impacted the December quarter. But at the end of the day, you'll make up for it in the March quarter.

Okay. And then also just kind of reflecting back on the last quarter, you made the observation that -- you indicated that promotional expense, so to speak, or margin expense would not be picking up in the fourth quarter. And now it seems like maybe it did a little bit. Can you just talk about what might have changed there and why?

Well, some of it is more products. We're displaying different brands. Scarab is a bigger presence. So those are expenses that we put into boat shows as well as Ocean Alexander, and we've had a 72 Ocean Alexander that's been traveling the Northeast at the shows and dealerships and events and that type of thing. And so those run up expenses some. So the expansion of the brands has impacted some of our marketing costs. And I mentioned that we're in 11 different displays in Fort Lauderdale this year, and those are extra expenses that go along with it. But hopefully, the sales more than offset that, which historically they have and we'll continue to.

David, on an annual basis, as we said in the March quarter, our marketing costs have come in line despite being modestly up here a little bit as we close the year. They are in line on an annual basis.

Right.

Okay. Last question. It's just, and if you said this already, I missed, and I apologize, but the used boats that you're actually selling at retail as opposed to wholesaling, is there anything changing significantly in terms of the profitability of that volume?

No. It's following the historical trends.

Last time, our question comes from Greg McKinley with Dougherty.

Just I guess a shorter-term question. How does the December quarter typically play out from a seasonality standpoint? Which months, is it 1/3, 1/3, 1/3, October, November, December or which month tends to represent the larger share of sales? I wonder if you can give us some context for that?

Yes. It's -- November typically would be the bigger primarily because of all the Lauderdale deals that are closing in that quarter are going to be more likely closed in November than December because everybody's traveling and so forth. So it would be number one, November; number two, October; number three, in terms of size would be -- the smallest would be December historically.

However, last year, December was strongest month [indiscernible] some larger boats.

Last year was different. Last year -- December was very strong last year.

Yes. Okay. And then in terms of gross margins that we should think about shorter term, how impactful is this comment you've made around? We now have seen normalization of our used boat inventories. Is that something that we can then expect to almost start showing up real-time around your December quarter margins or we'd even look for sequential improvement or I guess, how should we think about that impacting shorter-term margins?

I think the December quarter is such a small quarter, it's hard to really -- when I say that relative to the year, it's hard to give a whole lot of predictability around the December quarter. But I do think as we go into the back half of 2016, the potential is there to begin to have the margin growth that we've all talked about on this call. And part of that could come from more normalized use as a percentage of overall business because of how we're starting the year.

And with no additional questions, I'd like to turn the conference back over to Mr. McGill for any additional or closing remarks.

Thank you, operator. And in closing, I'd like to, again, thank our team for their passion and efforts and all of you for your continued interest and support of MarineMax. Mike and I are available today if you have any additional questions, and we're off tomorrow to Fort Lauderdale. Thank you.

And ladies and gentlemen, that does conclude today's conference. Thank you all, again, for your participation.