Good morning and welcome to the MarineMax, Inc. Fiscal Fourth Quarter 2018 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Brad Cohen, Investor Relations for MarineMax. Please go ahead, sir.

Thank you, operator. Good morning, everyone and thank you for joining this discussion of MarineMax’s 2018 fiscal fourth quarter and full fiscal year results. I am sure that you have all received a copy of the press release that went out this morning. What if you have not, please call Linda Cameron at 727-531-1712 and she will e-mail one to you right away. I would now like to introduce the management team of MarineMax, Mr. Bill McGill, Executive Chairman; Mr. Brett McGill, Chief Executive Officer and President; and Mr. Mike McLamb, Chief Financial Officer of the company. Management will make a few comments about the quarter and the year and then be available for your questions. And 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 Brett, 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 could 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 Brett.

Thank you, Mike and good morning everyone. Before I recap our great quarter, I need to thank Bill for well over 20 years of guidance and leadership and for his continued support in my role as CEO. He will comment later on his role for the future. As for the quarter, what a fantastic end to a very strong year, our impressive results were entirely due to an energized team performing at a very high level. I am very proud of the hard work and the extra effort that undoubtedly saw our market share continue to expand as we excelled in most categories during the quarter. Our fourth quarter results were quite impressive as we delivered 23% revenue growth to $309 million driven by very strong same-store sales growth of 22%. Gross margins were healthy from a brand-by-brand perspective, but a greater mix of traditionally lower margin, large GAAP sales compressed our consolidated margin. After adjusting the fourth quarter expenses in both periods for items mentioned in the press release, the team did a pretty good job managing costs. We produced an impressive 56% increase in normalized pre-tax earnings and adjusted earnings per share growth of 105% to $0.45 per share. I will add that in addition to strong boat sales in the quarter, we generated solid growth in most of our higher margin businesses such as service, brokerage, F&I and parts and accessories. For the full fiscal year, revenue approached $1.2 billion. Gross margin dollars grew by almost $33 million and we again modestly grew our gross margin percentage for the third year in a row. Given our revenue growth and absent a meaningful spike in healthcare claims, our year-over-year expense growth was reasonable. This resulted in adjusted pre-tax earnings growth of 30% and adjusted earnings per share growth…

Thank you, Brett, and good morning again everyone. Let me also thank our team for an outstanding close to a strong 2018. It was impressive. The strength in the quarter allowed us to achieve the top end of our original same-store sales range for the full-year and exceed the high-end of our earnings guidance range. For the quarter, revenue increased $58 million to $309 million driven as Brett said by very strong same-store sales growth of 22%. While Florida led our growth, we saw growth in just about all of our markets. The same-store sales growth was comprised of about one-third unit growth and two-thirds price growth, primarily due to the mix shift of larger product. From a gross margin standpoint, the mix to larger product compressed our consolidated margins. From time-to-time we do experience stronger growth in larger product, which does consistently have this effect. But when it happened, it usually produces meaningful earnings growth like you did this quarter. Selling, general and administrative expenses rose to $63 million for the quarter after removing the gain outlined in our press release. Beyond some elevated healthcare claims and cost associated with stores being shutdown for Hurricane Florence, expenses were reasonably in line in the quarter. Let me now touch on the contingent consideration gain we had in the quarter. Under GAAP, companies need to use third-party valuation professionals to estimate and accrue the fair value of what will likely be paid out under earn-out scenarios at the end of the earn-out. While the acquisitions that we have completed are performing quite well and we are making earn-out payment, the most recent valuation at fair value did reduce the original estimate. For the quarter, interest expense was basically flat despite a rising rate environment due to our efforts to reduce our…

Thank you, Mike. Congrats. I would like to add my congratulations to Brad and the team for producing an impressive 2018 capped by very impressive September quarter, simply put, wow. I also want to say how honored I have been to serve as your CEO for the first 20 plus years of MarineMax. It has been very rewarding, fun and inspiring. Nothing makes me happier than seeing our teams strengthened and grow. In my new role as Executive Chairman, I will work closely with Brett, Mike and the rest of our team through this important transition, but given their years of experience, I expect the transition to be smooth. I will also work with the board and Brett on our various strategies for the future. So while my role has changed, I will stay actively involved and excited about our future, our future successes and performance. And with that, I will open up the call for your questions.

Thank you. [Operator Instructions] We will now take our first question from Joe Altobello from Raymond James. Please go ahead. Your line is open.

Thanks. Hey, guys. Good morning. First before I ask the question I want to wish you, Bill good luck as well as Brett going forward. Mike, I want to go back to a comment that you made just now about December quarter, you did point out that historically that’s been a breakevenish quarter for the boat industry, you guys have had positive earnings the last four December quarters. So I am curious why this quarter might be different?

I think probably all 4 of those years I reminded everybody about seasonality. When you just look at what typically happens in the industry, it typically is the smallest of the lows of all the quarters. And so seasonally, I think as people are modeling the business, you just got to keep all that in mind. Obviously, everyday we are coming into work trying to be positive again is just as you are laying out your model, I think it’s prudent to remember, let’s say, for 2018 quarter and two-thirds of them have been a loss. We have had a nice run of late and we are going to continue to try to do that but it’s just as you are modeling the business just remember that’s seasonal. There is no concern I wanted to make that clear, our backlog is up, we feel good. We are 1 month into the quarter. We got November, December in front of us. It’s just a reminder of how our industry is.

Okay, understood. We are now a year to move from Irma, any signs of replacement cycle and have you seen any impact or soon to be any impact from Michael on the boat at the panhandle?

I think, with, Joe, this is Brett, with Irma, I think we have continued to see kind of a steady pace of replacement, but no spikes or jumps or anything that really stands out at it. With Michael, we are still trying as best the losses as both damaged. So, it would be hard for us to understand that at this point.

Okay, great. Thank you, guys.

Thank you, Joe.

Thanks, Joe.

We will now take our next question from Greg Badishkanian from Citi. Please go ahead. Your line is open.

Hey, guys. It’s actually Fred Wightman on for Greg. The commentary for the Sea Ray inventory seem pretty positive, but I am wondering if you could just talk about from a higher level how that transitions playing out versus your expectations. I think in the past you talk about some potential margin pressure as a result just wondering if that’s played out in line with how you guys were thinking about it?

Yes, Fred. As we noted in the script there that Sea Ray cadence was excellent with good support by Sea Ray not only on the sales side, on the warranty side, the brands, the confidence in the consumer. So, we felt really good at how things went. We are cautioned by what margin pressure it has crept in or what might come in, but the cadence has been good on selling products we are down to, really candidly very few and that don’t anticipate a big problem with that.

Okay, great. And…

Yes, go ahead, Fred.

Sure. And then in the last quarter you guys had talked about some supply constraints from Mercury and Yamaha. Just wondering, if you’ve seen any improvement in the availability in the channel and if that’s translating to retail yet?

Yes. I think there are still some supply constraints from both. It’s – it gets better each month, each week, and each quarter. I don't have what the impact was in our current quarter, but I think as we continue to move through the December quarter to the March quarter, it should be – should subside I would believe.

Thank you.

Thanks, Fred.

We will now take our – we will now take our next question from Eric Wold from B. Riley. Please go ahead. Your line is open.

Thank you, guys. Good morning. Actually, follow-up question on the Sea Ray, obviously nice to see less than 20 left of the 60 plus. Anything different of the kind of the inventory composition of those remaining 20 versus the 60 that why they may have not moved versus the others or it’s just it’s kind of the same just those ones haven’t moved yet?

Yes, it’s just they haven’t moved, there is no difference. It’s just what's left of the remaining models, all great boats. I suspect we’ll carry them into probably into the March quarter sometime.

It’s a fairly broad range of the model.

Yes.

But it’s not stacked in one area that gives us big concern or anything. It seems to be just –

Okay.

Yes.

And then the transition into more Galeon and Azimut of the 40 foot and above moving inventory. How’s that transition played out so far, been received well by boat buyers?

Yes. So far along with the success of the Sea Ray model selling, we've seen a good cadence of the Galeon and Azimut sales and then we’ve seen a good success, taking some people that maybe wanted some different moving them to Azimut, where maybe before they would have considered something else. So, we‘re seeing a good sign there. It’s going to – we would put in a lot of training. We took our team to some special events for training. We’re getting our top sales team members to the factory so they can understand the products better. So, we’re trying to do everything we can to make that these – some of these customers who bought three, four, five, 10 boats from us over their lifetime of boating, we want to keep that going.

Perfect. And then just final question, just underlying trends you're using kind of in boat financing, any changes in kind of consumer behavior around interest rates starting to creep up and what are your thoughts that the interest rate is little higher?

No, like, I mean, our unit growth is pretty strong in the September quarter, that was a quarter that, that’s certainly saw rising rates. Just as a reminder, when you look at the marine industry and plot it over time, rising rate environments are most often the strongest periods, obviously, the rising rates try to cool the economy and the economy is heated up, our typical buyers are making more money either in their small businesses or in their paycheck. So, it traditionally is a good time for our industry.

Perfect. Thanks, guys.

Thank you.

Thank you.

We will now take our next question from Scott Stember from C.L. King. Please go ahead. Your line is open.

Good morning, and thanks for taking my questions.

Good morning, Scott.

Just going back to the Azimut and Galeon moves that you talked about, obviously, this quarter there was a good benefit from moving up the Sea Ray product. Just a couple of things maybe just talk about how the rest of the Sea Ray line is doing meaning the stuff that you will continue to be selling as well as your guidance for 2019, how does that incorporate or what level of success of transfer to the Galeon, Azimut brand, does that include many, is there upside to that if you were to see better success?

We – the success of the Sea Ray sport yachts as we noted was great. We still have a huge backlog on some of the hot Sea Ray models below 40 feet, the 400 SLX and many of their other models, still on very, very high demand. Again, just met with Sea Ray recently excited about the products they’ve come and our team is excited and we see a very good backlog and cadence there.

Yes. I would say on the guidance we’re assuming being reasonably successful certainly not overly successful. So, like any company when they give guidance out there, they would like to think there is upside to their numbers. So, the manufacturers of both Galeon and Azimut have stepped it up and made available models for us and product for us to fill the void from Sea Ray, where we have good visibility to that, in many cases the product gets either on the ground or coming. So, we feel good that we definitely have the tools to achieve and potentially exceed our guidance depending on the success of that transition.

Got it. And last question on healthcare. Could you maybe just frame out for us what the level of the charge was or the increase in the quarter and how do you take healthcare into your guidance for ‘19, and that's all I have? Thank you.

Yes, so I can. So, in the quarter healthcare costs were up around $0.5 million. I’ll also add that and ensure that, that hard costs associated with Hurricane Florence was around $0.5 million, that doesn’t include any efficiencies of stores being closed. For the full- year our healthcare claims were up about $3.5 million and those were claims, we've not assumed any reduction in that in 2019. So obviously when you look at how the actuaries look at our company, we’re trending higher than we probably should be. Hopefully the actuaries tend to be right over time and hopefully we can get some benefit perhaps at ‘19 or soon on the rising claims. But – hopefully that answers your questions on what we did with guidance and also on the current quarter healthcare claims.

That’s good. Thank you.

Thank you.

Thank you, Scott.

We will now take our next question from James Hardiman from Wedbush Securities. Please go ahead. Your line is open.

Hi, this is Matt McCartney on for James.

Hi, Matt.

Just had a couple of questions for you. Just – hi – just firstly on the industry data seem to show a pretty significant deceleration over the course of the quarter, just wondering, if that's what you are seeing as well?

We actually had good cadence July, August and September. The industry data has been certainly a topic of discussion. If you remember July was up, I don’t know like 45%, then August was down 25%, I mean, obviously, that's not what’s happening in the industry not to that degree. So, we had a pretty good unit growth right through the – right through the quarter and obviously very good dollar growth, that could be obviously a lot that’s probably our strategies, some of that's our brand, some of that’s our markets continuing to outperform the industry.

I was going do add that with our strategy all through the summer months of getaways and getting our customers out in the water, the more premium products that we tend to focus on, it’s just that provides a lot of growth by doing those events, and I think we’re all-time high in the summer.

Okay, thanks. That's really helpful. And then just kind of outside of the big yacht sales there obviously someone unpredictable and helped your ASP in the quarter. Can you talk about sales trends in terms of boat size, features, horsepower et cetera that might affect the ASP going forward, and then how should we think about the mix between pricing in ASP in the context of your guidance for FY19, speaking on to same-store sales?

I can tell you, Brett commented that, anyway our outboard has been very strong and that's true. That can start in a 20 foot all the way up these days to 53 foot or even bigger. So really when I think about ASP the shift to outboard doesn’t really reduce ASP, it probably – if anything may increase ASP some as people were putting more engines on the back of boats. So that’s probably a positive from a same-store sales perspective. I just think in general I know based on our customer base and our type of products that we deal with, I mean, people like if they're going to spend the recreational dollars, they want to get a fully equipped product, which also increases ASP. So I think in general, we’re probably in an environment where the industry is selling more loaded boats with more toys and technology, that probably does incrementally increase ASPs. And then specifically as – and I think what you’d asked about just what's hot in outboard product and really anything new continues to be hot.

Okay, great. Thanks. And then just lastly, are you seeing any evidence maybe anecdotal otherwise that tax cuts are helping current boat sales or do you think that's something we have to wait until tax return season to see or maybe just a non-factor overall?

Well, we’d just say that business has been good and consumer confidence is good, and so it must have some impact, but I don't know if we have the actual data that tell us that that’s why it is, but it’s the business is good.

Okay. Thank you. Those are all my questions, I appreciate it.

Thanks Matt.

Thank you.

We will now take our next question from Michael Swartz from SunTrust. Please go ahead. Your line is open.

Hi guys, good morning.

Good morning.

Good morning.

Hi, just quickly on I guess as it relates to Sea Ray, is there any way to isolate maybe the impact that the clearance activity obviously was very strong in the quarter, maybe the impact that that actually had on gross margin, I am just trying to get a sense of maybe what gross margin would have looked like if we didn’t have that activity going on?

I don’t have that Mike in front of me to try to quantify it. I think overall margins would be a little bit better without it. But like Brett said, the demand for the last build sports yachts and yachts has been better than probably anybody anticipated.

And the other models, the brands as whatnot were pretty darn strong in the quarter.

Okay. And then I guess sticking on gross margin as we think about your ‘19 guidance might, I mean, how should we be thinking about that, maybe you can frame in terms of puts and takes as we go into the new fiscal year?

Yes. So we did assume much in the way of gross margin expansion. Obviously, we are going to try to continue to grow our gross margins like we have the last 3 years, but that’s not in our guidance. Our guidance is really the top line story of 5% to 10% same-store sales growth and then leveraged in line with what we have had the last couple of years. I think there is upside in both of those, because our leverage last couple of years has been improving, but I think there is still opportunities there as Brett said and then I think there is opportunities on the gross margin side. So, our guidance has really – the question is does it seem about right on the top line? The industry grows 5% in units. We are in the 5% to 10% top line just given ASP expansion and achieving leverage similar to what we have had, we ought to be in the $1.85 to $1.95 range with potential upside from that. Obviously we got many months ahead of us which show that we can get the upside and when we get sales and all that stuff, but there is no incremental benefit baked in on expectations around expansions of margins. Go ahead.

Just one final question, this is more of a 30,000 foot question just around maybe some of that incremental demand you have seen stimulated around larger boats and specifically at Sea Ray in the quarter, I mean does that tell you anything about the level of maybe pent-up demand in some of these larger boat segments to the extent you can. And also just in terms of maybe the cost or the price inflation we have seen in those boats going back to gosh, even 5, 10 years. I mean when a boat is priced right, it seems like it’s moving, so I guess just could you help us understand again the wrinkles of price and on that – I guess on that larger boat business?

It’s again I go back to when a boat is equipped the way people want it, which on a larger boat, it’s equipped very, very luxurious. Obviously the price matters, but they will pay for how the boat is equipped and that’s the way we bring our product in. I think you are right about pent-up demand, I think there has been a – with the increasing wealth in the country and maybe a number of years people can buy big boats following the financial crisis. There does seem to be some additional strength driven by the wealth that’s been created out there plus new models that are coming, manufacturers have built bigger boats and nicer boats.

Yes. As the cadence of boats float over those last 10 years and then new models came out with new innovation and there weren’t as many as quickly, so it’s just I think lengthened the cycle of that. But there is still a good demand. When we come out with a model with some innovation or a layout hit and it’s a competitive world out there in the pricing and where we get that price dialed and we will get our team trained the boats sell.

Mike, I know you are going to be down in Fort Lauderdale this weekend. And when you look at – if you go our booths or Azimut booths, our Ocean Alexander booths and others I mean all the bigger stuff there, at least most of it is new models. There is a lot of new models coming either right now or the foreseeable future which should help to continue to stimulate that type of activity activity.

Alright, great, that’s it for me. Thanks a lot.

Thank you.

We will now take our next question from Brandon Rolle from Longbow Research. Please go ahead. Your line is open.

Thank you. Good morning and congrats on a very strong quarter.

Thank you, Brandon.

I guess a lot of my questions have been asked. I guess one could you speak to the used boat sales trends you have seen we have been hearing since mostly new product out there, used boat inventory scares. And then also just looking at 2019 and the mix of boats, with the stronger U.S. dollar, do you think you will continue to see strength in Ocean Alexander and Azimut and those boats that are larger than 70 feet to 80 feet through out 2019?

Yes. As far as the used boat sales it is scarce to get good used products in our inventory and when we do, they move quickly. So that I would say the used trends are good and we don’t see as many trades maybe as we did many, many years ago. So it’s hard to get the inventory, used boat inventory. And the mix of the boats we see we look out at Azimut’s current boats and their boats that will be coming and in Ocean Alexander and many of the other like Mike said they are all new models and they are very exciting stuff coming that really hits a point that the market right now is looking for. I said the dollar helps, but I think even if the dollar wasn’t as strong as it is the demand for the new models because they are new we would still propel the sales of Galeon and Azimut, Ocean Alexander because it’s all the new stuff coming it. And as we have always learned over the years new sells, that’s what people want so.

Okay, great. Thank you.

Thanks Brandon.

We will now take our next question from Joe Altobello of Raymond James. Please go ahead. Your line is open.

Hi guys. Thanks for taking my follow-up. On that topic Mike in terms of Galeon and Azimut – Ocean Alexander and sort of making of the roughly $100 million hit from the loss of the Sea Ray sport yachts and yachts business, it sounds like you guys are assuming that you are not going to miss a beat there and that they are able to sort of soak up that demand, is there a manufacturing capacity issue with those brands?

Good question. And the answer is no that we have already worked with both manufacturers and we expected no matter what was going to happen with Sea Ray back before the announcement came on that whether they were sold or something that there was going to be sometime here where the new buyer was going to have to redo their models and perhaps production would come down. So we had already increased orders prior to the announcement for both Azimut and Galeon. And then when the announcement came out we obviously had a little bit additional work to do with both manufacturers. Both of them have been very flexible and have in some cases changed proportion and changed models to better align their product with the U.S. market and they have done it very rapidly which has been fantastic and kept quality up and everything else that you would expect, but now they both have laid out their production capabilities and like I said in many cases, products on the ground now have come in.

Okay, perfect. And on customer deposits, I know you tell us every quarter, it’s not to be all end all in terms of a predictor of future sales, but if you look at your customer deposits at the end of fiscal ‘16 it was $30 million again in fiscal ‘17 it’s $21 million, now we are at $17 million, is that an indication that more of your sales include trade-ins, then if so does that imply the supply of used boats is starting to creep up a little bit?

I think what it’s implying is there is less trade, because trades are very big dollars. So less trades at our point in time is what I mean. Customers are holding on to the boats until their new boat comes in. And so we may have cash deposits, let’s call it 100 grants, they have $2 million boats that they are using. They have the new boat on order. The new boat, I can think of a boat right now, so I am talking about this. The new boat is already here, we will take delivery of it in November. We will take trade in at that point in time. And at that point in time let’s no longer call it customer deposit, it’s called used boat inventory. That is I think where it is people out there enjoying the boats, not trading the boat to us, the new boat coming in, I think is a big chunk because during all those periods we have grown the business. And it’s a line item that gets attention for the reason that we have all talked about, but I think the bigger comments are what’s going on in our backlog and what’s going on in retail business today, which has been generally good for a long time.

Okay, very helpful. Thank you.

Thanks Joe.

We will now take our next question from John Lawrence from Coker & Palmer. Please go ahead. Your line is open.

Yes. Thanks. Good morning guys.

Good morning John.

Yes. Would you – Mike would you comment just a little bit about the relationship with Sea Ray and as you continue to work with them on the other products, anything that they talk about delivery schedules design, I guess just some of those things that might have changed in the relationships since they have made the decision and how do you look at that going forward?

I will say, our relationship with all of our manufacturers has always been very strong. And our relationship with Sea Ray is very strong. We work with them very closely on thoughts around new models, price point, options we continued to do that. Obviously, we are an important partner to them. So they work with us as well, with the product below 40 feet with the leadership in the part of the organization I would say has been – it’s great.

We just had a form or we brought a lot of our managers and so the Sea Ray could talk about where they are at and how things are going, the future plans. And it looks like they are going to be able to meet our forecast or build in some great models and all that appears to be online and our relationship appears to be as strong as ever.

Great. And secondly any changes to the boat show schedule as we look through the quarters and all of that, anything shifting around or is it pretty much same as ‘18?

The only thing that was brought to me earlier today, so the December quarter last year the Tampa Boat Show got moved into October because of Irma, Hurricane Irma. So it was in September this year, so we had some incremental benefit although it wasn’t a real big driver in the quarter, but it was an incremental benefit for the September quarter, that’s the only thing I can think. Other than that boat shows they are held, they are all about the same timing and we can think with kind of kicking off right now.

Alright, great quarter. Thanks and good luck.

Thanks John.

Thank you.

It appears there are no further questions at this time. I would like to turn the conference back to you for any additional or closing remarks.

Well, thank you for joining us today. Mike and I will be around today for any of your questions. Thank you for your support and belief in MarineMax. Have a good day.

This concludes today’s call. Thank you for your participation. You may now disconnect.