Good day and welcome to the MarineMax Inc. First Quarter 2017 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Brad Cohen. Please go ahead, sir.

Thank you, Operator. Good morning, everyone. Thank you for joining this discussion of MarineMax’s 2017 fiscal first 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 dial Linda Cameron at 727-531-1700 and she will e-mail one to you right away. I would now like to introduce the management team of MarineMax, Mr. Bill McGill, Chairman, President and Chief Executive Officer and Mr. 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 again everyone and thank you for joining this call. Before I turn the call over to Bill, I would 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 would like to turn the call over to Bill.

Thank you, Mike. And good morning everyone. What a great way to start our fiscal year. Not only did our team produced sales growth exceeding 33%, we also achieved our second best quarterly pre-tax earnings. Furthermore, despite increased seasonality resulting from our northeast acquisition of Russo Marine last April our December quarter profits more than tripled last year’s bottom line. This is the third consecutive year MarineMax has produced a profitable December quarter. I would like to thank the MarineMax team for all their hard work and continued commitment to our customers centric approach which is evidence by our result is resonating with body enthusiasm. Our 33% revenue growth was driven by very strong 28% same-store sales growth which is on top of 8% last year and 45% the prior year. While the December quarter is the smallest quarter of the year, our robust growth should serve as substantial support as the marine industry recovery is continuing and the boating lifestyle has been solved by consumers. We attribute to continue the strength in our business to a combination of our team's talent and focus on our strategies. The flow of innovation in the new products and our balance sheet that can support the growth initiatives we have in place. Furthermore as the heart of the business is the fundamental execution of the MarineMax strategy that delivers the boating train by exceeding our customers' expectation as we enhance their life through boating. Our stores continue to excel taking care of our customers and helping them to enjoy the boating lifestyle. Our growth was stilled by an increased in larger yacht from partners like Ocean Alexander and Azimut. As we have indicated historically these larger yacht traditionally carry lower margins which do compress our consolidated margins, but every time if this happens…

Thank you, Bill. And good morning everyone. I want to also thank our team for producing a strong December quarter and outstanding start to 2017. For December quarter we grew revenue almost 34% to $227 million. The growth was driven by very strong double digit same-store sales growth 28%. Our same-store sales growth was aided by larger products and was driven about two-thirds by an increase in average yield selling price and one-third by unit growth. Geographically most market share growth but Florida with the larger boat emphasis led the charge. I would add each month was pretty good and the quarter grew in strength right through December 31, which is unusual given the holidays. Our gross profit dollar increased 28% year-over-year via gross margin percentage contracted as Bill mentioned the gross margin contraction was primarily due to the sales of larger yacht which traditionally carry lower margins. On a brand by brand basis, gross margin generally did well in the quarter. Selling, general and administrative expenses meaningfully improved as a percentage of revenue as we leveraged the cost structure. Keep in mind last year we didn't have the expenses associated with Russo acquisition in the December quarter. Additionally while we have all other expenses you can imagine it's not necessarily a strong revenue quarter in the Northeast to Bill's earlier point about increase in seasonality. Interest expense increased to $1.6 million due to additional borrowing to support inventory. However, interest expense has a percentage of revenue modestly improved. From an income tax perspective as we said last call we didn't expect to pay any material taxes until we absorb our remaining NOLs and other deductions which approximated $21 million when fiscal 2017 started. However, we are required to overwrite a tax provision and our ongoing annual rate should be…

Thank you, Mike. We have now entered the busy boat show season in our first quarter earning the results, had start make that a positive count for 2017. As we have previously mentioned new models, the innovative designs and technology are being introduced to the industry. And we cannot be more excited to share these with our customers. Our customer's enthusiasm and energy where you're experiencing at our early boat shows about the upcoming boating season is definitely growing. And this is where our team can and should excel in getting seasoned boaters and new boats now out on the water. We could not be more proud of the hard work our team does every day. As our customer centric approach enhances life through delivering the modding grain to our customers. MarineMax remains an industry leader and we will continue to strengthen our balance sheet and present in the market. As we remain committed to building long-term value for our shareholders. And with that, operator, we'd like to open the call up for questions.

Absolutely. [Operator Instructions] And we'll take our first question from James Hardiman from Wedbush Securities. Please go ahead, sir.

Hi, good morning. Thanks for taking my call and congrats on a really strong quarter here. So, I'm sure if you can get this question quite a bit. Can we just walk through maybe some of the potential trump impacts to your business, maybe walk us through the tax map. Obviously, you're not paying any cash taxes but you got a nominal rate in the high 30s I believe. Let's say the corporate rate goes to 20, where does your high 30s number go to and what type of an earnings impact would that be. And then how should I think about how much of your product is imported as we think about potential import taxes going forward?

I can talk on taxes just for a second. Obviously, with the federal rate of 35 plus all the states, we get a close to 39%. So, if the corporate rate goes to 20, just take 15 points off about, so we'd be down near 25 or something like that, which would be obviously huge to a company like ours, since we're already at the top tax rate. We have one material supplier today, material and that we disclose it in our 10k which we import and that's the actual brand which by my memory we're a little over a 100 million in 2016. Of course, all the discussions around that border, just the tax, that's good -- it's unclear exactly what's going to happen from that perspective.

We'd add Brad, is not a US manufacturer producing offshore.

Right, so, good point.

Here we don't believe that will be attacked impact at all.

Good old foreign bill that we import.

Very helpful. And then just real quickly on the guidance here. You raise your guidance $0.10, I think you said Mike, that about half of that was the HO acquisition. Did how benefit the first quarter at all, so can you quantify that and ultimately it sounds like what I'm hearing is, you had probably more of a benefit in the first quarter that you've thought or your deed expectations in the first quarter maybe more than you thought. Obviously, you don’t get quarterly guidance. But you remain in pretty conservative on the remaining three quarters just given the magnitude of those quarters relative to the December quarter. Is that fair?

Yes. So, HO marine, we acquired them in mid-January, so that it had no impact on our first quarter ending December. Clearly, we started the year up strong, it is the smallest quarter. We need to work through the March quarter and we believe we're being conservative but are not but time ultimately will tell that. It gives in our business that we're creating every day and technically we still have more than three quarters in the last, we thought it was prudent to just rate that the nickel plus and nickel from all which is a $0.10 increase in the guidance.

And we still have a lot of a large shows ahead of it. The shows we've been in thus far James have been up in generosity and like we began in New York, brought the HO tomorrow. Mike and I are here today like we're actually this dollars coming from New York Stock Exchange.

New York Stock Exchange.

To launch the show beginning tomorrow morning and then we have the real large show ahead of it called by Amy, which is in February. So, there's still a lot of runway ahead of.

Perfect, thank you.

Thanks, James.

And we'll take our next question from Steve Dyer from Craig-Hallum. Please go ahead, sir.

Thanks, good morning and congratulations, guys.

Thanks, Steve.

Thank you.

Sorry, if I missed this but did you breakout unit growth between new and used, in the prepared remarks?

We did not, what I did is I said our same store sales growth was roughly 2/3rds average in selling price and 1/3rd unit growth, which gets you to like a high single digit 9%, a little bit over 9%. There is not a whole lot of difference in our new and used. Our new growth was pretty good throughout the December quarter as was used in both.

Great. And then as it relates to inventory, how do you feel about that or are you constrained anywhere, new hot maybe some color on that?

All the new hot models, we could always use more but I think in general we feel pretty good with our inventory. Our used inventory is actually down a little bit over the prior year. I know that something that people would ask about over the years. But that’s just timing. I think with the boat show seasons coming up and the trades we then take will be fine on use.

And we're the important brand like Sea Ray was starting to get here at deluxe models and then we're having a great success when we met the road shows, primary shows. So, we're encouraged that we'll be able to get in our product this year already in the hot new models that will help us see the color.

Got it, okay. And then, I guess lastly for me, can you talk a little bit about the cadence of the quarter, I guess pre-election, post-election, any real differences tat's off the prior years?

Like, I think -- Steve we went into the Fort Lauderdale Boat Show, which was the week before, Election Day.

It ended nine on Monday.

Yeah. And we were good, we were scratching our head, saying I wonder people are going to wait and see and what we saw at the show was they didn’t wait and in fact there were three other, they had a record show. And following the show, we're or the election choose me what we're hearing from the majority of our customers drilling that all but the majority of our customers is the big comes up. And we're excited about the change, we're excited about the tax changes that maybe occurring from business and also for individuals and help stimulate the economy and so I'd say they're a lot more optimistic and I think we're seeing it in our shows, so we just finished Minneapolis boat show on Sunday and it was a record show for us. And sure, still a more encouraged. So, we went through the election time and all the news and confusion and everything. It was going on and did quite well and delivered an outstanding quarter and now we got to keep it going. So, we're going to try to trump this next quarter against the one we just add.

Got it, okay very helpful, thanks guys.

And we'll take our next question from Joe Altobello from Raymond James. Sir, please go ahead.

Thanks. Hey guys, good morning. I guess first question sort of big picture, how you guys are thinning about US cardboard industry for '17 obviously coming off the mid-single-digit growth. Are you presuming any material change of that or another year of roughly mid-single-digit growth in terms of units?

I think until we get a lower further through it, I don’t think the industry is going to change its outlook and now that we're going to change it until we get maybe through the March quarter to see if there is stronger trends happening out there. We certainly saw some pretty solid trends right through the December quarter and as Bill said early boat shows are encouraging. December is the smallest quarter, March is a very meaningful quarter and actually the month of March is a very important part of that quarter and also set up for the year. As it begins to get warmer in places and our, put traffic against to pick up in March. So, we'll have a better idea when that quarter ends. But I think the some other points that Bill made that does seem to be a little bit of an increased enthusiasm in the marketplace today.

Well, since you mentioned the March quarter and you guys have a fairly tough compare when it comes to weather, particularly in mid-West and North East. Is that something that we should be thinking about as the, thinking about the cadence of the quarters for this year?

It’s we're upwards of the tougher comp of 16%. I think it's possible for watching weather that weather doesn't unfold quite as nice as we did last year as an example that it could impact us and in that. In those regions it's just hard to tell right now. I think generally weathers pretty reasonable everywhere today. But what deluxe said to the quarter to your point?

Okay. Just one last one if I could. In terms of the incremental margin that you guys saw in the quarter. I guess a little bit of an improvement, we're curious what the impact of Russo was on an incremental margin then how much better would have been ex- Russo? Thanks.

What? I did not actually do that math. MarineMax would have had a little bit better pretax margin overall than Russo would have had. They were I will say they were profitable. So, one of the things I said in the last calls, they typically don’t make money but Russo did make money at the December quarter, partly because of the honestly how well we're all working together and leveraging our inventory and so forth in their normally highly seasonal quarter. So, the fact that they were able to leak out some profits helped a lot. But MarineMax's bottom-line as a percentage would have been better.

Okay, great. Thank you, guys.

Thank you, Joe.

Thank you, Joe.

And we'll take our next question from Jimmy Baker from B. Riley & Company. Sir, please go ahead.

Hi, good morning Mike, good morning Bill. Great quarter.

Thank you, Jimmy.

Thank you, Jimmy.

I just want to start with a question on the industry data. So, it seems maybe throughout '16, calendar year '16, that is more difficult but usual to triangulate with your business. So, one of the segment owners talked about a particular the high in your market, 60/60 is in larger, the worst performing segment for the industry down double-digits. Can you just sort of help us understand that in the context of your business is that outperformance for the brands that you carry out performance in the geographies that you are most concentrated or just you're out there gaining most of market share again competitors in your same region even in what's in your brand?

I can say in general we're gaining market share in all segments and all brands and just about all geographies. We got a 100% all the time but we do pretty well. I mean, I'm a little perplexed by the data myself. You wind the clock back five years ago, the data wasn’t very useful, and it sure has been useful for the last five years up until this year. I don’t know exactly what's going on in it or if it's simply just our outperformance with our brands this quarter-after-quarter continues to exceed it. We have obviously it's a very strong team, strong brand, some good, some of the best markets out there, better markets out there which I think are all contributing to our growth. But when you look at the data like for December, the industry data showed 41% down in the out, I mean, we were not 41 in the September yet or 18% down in October. We were not and like mostly on more time try to dig into with the folks from SSI, we have Jimmy, just to get a better understanding to help you guys out.

The sale of a small boat and a large yacht is still relationship selling and is people are especially in the larger yacht want to do business with the company that they know is healthy financially. And that has a team that is passionate about what they're doing and in some cases the larger yacht that are out there today are it's a factory direct model in some cases. So what do you get there is an individual is do you get this support, when we run we run at the problems that if there are any problems and when they occur, because if, customer has a problem whether they created it or the manufacture created it or we helped created it, it's our problem. And we run to it and you'll necessarily get that from brokers that are selling larger boats that were even the manufacture in some cases that have representation that are on it but based on -- now the support that we give to your customers for Ocean Alexander for Azimut, for Gallon or Sea Ray or Boston Whaler is second to none and at the end of the day that you’re buying a lifestyle not necessarily just the product that you need to help with. So we are there to do it and I think that's the big differentiating thing between MarineMax and most of the industry that's out there today. And we have got dedicated people that are focused on taking care of that customer second to none. From now on service perspective but also having enjoying the boat on the water and that's really what makes the difference.

That's helpful and actually my next question as you improved that new boat inventory position, new boat availability are you seeing any changes in the sales cycle I guess you just talked about the service element that you provide and the competitive differentiation that offers you versus someone on a factory direct model and I realize this may seem little counter intuitive given the shoring customer deposits you have that are more of your sales coming from product on hand where that availability inventory and your balance sheet are more important competitive weapon for us as we move deeper into the cycle?

It's interesting but as long as I have been in the business the when people are hot they are hot and when they are not they are not. And most of our customers they want it right away. And so being able to have inventory to your point Jimmy really helps us. And so having both end production in Italy is an example that our customer said well I don't have to wait year, year and half, and I am getting exactly the way I wanted in some cases or I will take it the way you have got it because wow I want it, you did a good job and specked it out. So we believe it is a differentiator and we will continue to be so. But probably more important than anything is we are there to take care of the customer as they are part of our family and that is huge because no one wants to buy headache they want to buy a wonderful lifestyle.

Sure, understood. And just last I had a couple of questions on Hall. When you think about their business, you speak to them kind of the inventory per location and floor plan expense versus what you see and kind of your corporate average on a first store basis. I am sure we assume that it's little greater than half of what you have on per location basis just given that's where their revenue was and then after Hall and Russo so you still have an active M&A pipeline or might we see that activity slow going forward?

Jimmy to clarify your question on Hall. What are you asking about inventory and?

Sure. The inventory per location and floor plan expense is let's say roughly half of what MarineMax's was previously. In other words there I mean the revenue per location was just a little better than half of the average in the MarineMax revenue per location. I am just trying to understand that?

The answer is yes. I apologize I misunderstand it but Hall just like Russo one of the benefits that they are already realizing is the strength that MarineMax's balance sheet and the fact that we do inventory product and to the Bill's point and to your point really so when the boat shows at the Hall team which is now the MarineMax team are moving into those markets. They have got much more product available to them and liquidity in some cases bigger product where there is bigger ways, always bigger Sea Rays etcetera for those marketplaces than they currently have in stock. So, Jimmy we said mean we now have $300 plus million worth inventories and they are as big as water melons but that's a real opportunity and they are not in some cases they wouldn't be stock and 65 is an example or maybe they sold it [indiscernible] we have amend the company. And so we are able to meet that customer need as far as your question are there others in the pipeline yes. We are working with them. We take a lot of time making sure that the culture are right because culture is everything and perfect proof of that is it's Russo, part of our family and it's like you just threw it all of the sudden it's MarineMax Russo and they have been in the family for ever but we make sure that before we make the acquisition. We did the same thing with the Hall group and we – that's exactly what we got. We have got a passionate team that care about the customers that do everything pretty well the way we do and we will learn some things from them so if this is not all about us helping them totally we have learned some things from Russo. We will continue to do the same for the Hall and so but culture is everything. And we are doing acquisition just for territory or to grow the company. We want to make sure that it's the business that will continue and that the people will continue. So we are interested in the thing your people and the company and their management.

I would just add to that so the Max, the MarineMax and how big we are becoming again assuming the industry keeps its cadence of 5%-6%-7% unit growth which I think people feel better about that today than maybe before the election the earnings power and losing theory from the company is much bigger than any reasonable piece of acquisition that we can go on. So while the acquisition is certainly part of the story and have been important one the underlying earnings coming from MarineMax are going to continue to drive a greater percentage of our upside for the foreseeable future.

That's understood. Thanks very much for your color.

Okay. Thank you Jimmy.

And we will take our next question from Michael Swartz from SunTrust. Sir your line is open. Please go ahead.

Hi guys, good morning.

Good morning Mike.

Mike or Bill just a question regarding used inventory in relative to I guess what we saw this quarter with big yacht sale really driving the sales growth. I know we had some quarters in the past where we had these big kind of large yacht driven quarters where we saw some gross margin compression not only from just the gross margins that those boats carry but also from the trade which some of those I believe had to be wholesale the very low margin. So could you just help us understand is it similar dynamically should expect for the next quarter, just given the large yacht sales this past quarter?

Actually great question because we did have that issue couple of years ago. Technically today, our used boat inventory is actually down a little bit over the prior December which always means some of the large yacht we did didn't have trades otherwise it should be up to your point. So I don't think that should be a issue going forward and I think what we said also in the last year couple of times is the amount of deals that we are wholesaling is incrementally getting better and better as the raw age of the product as you’re no longer or you’re taking fewer 12 year boats are now taking 8 year boats which you are more comfortable selling those to your normal process. And so that's continuing to drop and it should continue to drop this year. So I would sure hope that we won’t have that discussion again this year.

Okay and then I guess how do we look at just embedded within your 17 guidance gross margin are we still thinking maybe flattish year-over-year versus 16?

Yes so the – another good question. So the – we did not change anything in our assumptions around our guidance meaning fairly low flow through around 80ish percent we took same-store sales growth up a little bit and we added Hall. So until we begin to show this quarter obviously had the best spike of the big boats which contracted margins after that gross margins and the basis were pretty good. Let us get through another quarter or big quarter of March let's see how we are able to perform through a flow through and from a gross margin perspective. We hope that would be potential upside but we get out there and make it happen before we are comfortable putting at our guidance numbers.

Understood. And just on the M&A front just two questions here. One I guess how much do you have in availability to make acquisition and the second piece is, are you seeing more competition for deals out there? I know there has been a lot of M&A activity going on in the space both on the marina and the dealership side. So maybe just a little color on what you are seeing there.

On the marina side you are 100% right. There is a lot of people chasing marinas today, shouldn't say a lot there is a couple big organizations out looking at marinas today. And we never – we have always stayed pretty true when we buy marina. We got buying for the long term purpose of operating marina but also have a mode store on it not having some other plan to maybe flip it into a condo or something else down the road which some people are having those ideas today. On the acquisition front we haven't run into competition for the deals that we are talking to. There is a little bit of increased activity out there but I think for the type of dealers we are looking at and with the succession planning they are dealing and the plain for their teams and who they want their teams to be working for and so forth we haven't learned any competition for the dealers we are talking to.

And just the availability?

In terms of cash?

Yes.

Yes. We have plenty of fire power on balance sheet. They are just in cash or in what we do is we make money throughout the given year because we are not net debt with our floor plan we have an unique ability to pay down our floor plan which can always been re-borrowed so we have a lot of equity in our inventory today which can be tapped to make ex, there is no restrictions that one is for, and most dealers including the automation don't have the ability to reduce the floor plan and re-borrow against the same vehicle or happen as we negotiated in their years ago so we have a lot of capital right there we need it.

Okay great. Thanks.

Thank you, Mike.

And we will take our final question from David MacGregor from Longbow Research. Sir your line is open. Please go ahead.

Yes. Good morning everyone. Great quarter guys. Congratulations.

Thanks David.

Can you just talk about what you are seeing in terms of Marin lending patterns and where in the nexus is having the greatest pause of impact?

Yes from the retail financing perspective in marina industry is one that's attracting more and more lenders. I think primarily the spreads on the auto side have been so compressed that they are looking at marine and RV and more lenders are getting in either regionally or has reasons probably not any change in the national flyers but which is a positive thing. And the terms are fairly favorable today I mean we have never had crazy liquidity because there has never been a securitization marine learns there all the banks hold them. So things are favorable and fine today.

And their loss rate shows they are very low.

Are there new banks coming in or is the same group that have been there in the past. When you say that there is a little more support just trying to get you that out.

Yes. I would say regionally around the country there is regional banks that are increasingly getting into the boat business and are also the recreational lending and all over really I would say all over the country.

Yes. Okay. And just last question it sounds like there is not whole lot of positive sentiments right now, deposits are backlog, boat show, registration to tenants all pointing positively just the question is just what do you perceive right now as kind of the biggest risk in terms of your business for 2017 and as you are formulating your guidance not withstanding I appreciate that this is the quite quarter you want to get into March before you have a lot more conviction in your outlook but what's the biggest risk in terms of the outlook at this point?

I would say it's external and like there is a lot of change occurring in the US and we are all believing it's going to be quite positive but no one ever knows and the media contend and try to look everything look bad. And but I think one being – what’s happening in our country right now is very, very positive and what we got to see is it happens and see it execute it on and [indiscernible] as we are all aware.

And Bill earlier in response to the question from James you were talking about distinction between foreign boat manufactures shipping in the United States or sending products from the United State versus US companies manufacturing abroad, bringing them in you felt because as and that goes up, European company that would leave you un-impacted I guess in a more sort of total look at this is there something you are seeing unfold anywhere kind of the whole discussion around tax or duties that would result in anyway and shift in your business in favor of domestically manufactured brands?

Well, what I have heard from Mr. Trumph is listening to what he and some of his people have said is that if you take jobs offshore you are going to pay a penalty to bring the product back in. And so, number one that's the manufacture and number two take a company like Azimut or Gallon they are not US company, taking jobs offshore and if you look at it forget boats for just a minute take TVs or cell phones or whatever it maybe you couldn't put a [indiscernible] in country we would have a real problem on everything we imported. So we don't see that is something that's realistic or would happen. I think it's a concern which are prodding for is why take the job offshore if they can be done here in the US. If you do then you are going to pay a penalty to do it. So we got to see what unfolds but I can't imagine that wouldn't – that it's not just what you did.

Congratulations on the progess.

Thank you very much. Appreciate it.

And now I would like to turn it back over to Mr. Bill McGill for any additional or closing remarks.

Thank you, operator. And in closing I would like to thank all of you for your continued support and your interest in MarineMax. Mike and I are available today and if you have any additional questions please give us the call if not we hope to see at New York Boat show. Thank you.

Ladies and gentlemen that does conclude today’s presentation and thank you for all your participation. You may now disconnect.