Good morning, and welcome to the MarineMax, Inc. 2021 Fiscal Second Quarter Conference Call. Today's Conference call is being recorded. At this time, I'd like to turn the call over to Dawn Francfort of ICR, investor relations for MarineMax.

Thank you, Operator. Good morning, everyone, and thank you for joining this discussion of MarineMax's Fiscal Second Quarter 2021 Conference Call. I'm sure that you've all received a copy of the press release that went out this morning, but if not, please call Linda Cameron at 727-531-1712, and she will email one to you right away. I now would like to introduce the management team of MarineMax. Mr. Brett McGill, President and Chief Executive Officer; and Mr. Mike McLamb, Chief Financial Officer of the company. Management will make a few comments about the quarter and then be available for your questions. And with that in mind, let me turn the call over to Mike. Mike?

Thank you, Dawn. Good morning, everyone, and thank you for joining this call. Before I turn the call over to Brett, 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 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'd like to turn the call over to Brett. Brett?

Well, thank you, Mike, and good morning, everyone, and thank you for joining us today. On the call, I will share highlights from our second quarter as well as provide an update on the continuing enthusiasm for boating. I will also touch on our positioning into the important June quarter and discuss the meaningful opportunities for MarineMax to create growth and long-term shareholder value in 2021 and beyond. Then I will turn the call over to Mike to review the financial results in greater detail and provide some color on the balance of the year. First, I want to share how proud I am of our team's ability to successfully navigate through this pandemic and produce consistent record results quarter after quarter. From the onset of the pandemic, we effectively pivoted to capitalize on the ongoing changes in consumer behavior resulting in sustained record results. It's important to note that we achieved these results while prioritizing the health and well-being of our team, their families and our customers as well as the welfare of our local economy. We anticipated more than a year ago that boating would be one of the beneficiaries of a changed world. We continue to see that development play out as evidenced by the 45% same-store sales growth and EPS increasing more than sevenfold in the March quarter. Boating continues to be a great way to escape the stresses of everyday life and strengthen the bonds between family and friends. The recent demand for boating has created a foundational layer of new customers. This is driving replacement and upgrade cycle that is supported by new technology and product upgrades, providing us with confidence that growth is going to be sustained well into the future. These new customers are embracing the boating lifestyle and existing and new…

Thank you, Brett, and good morning, again, everyone. I'd also like to start by thanking our team for their strong efforts that produced record revenue and earnings through the first 6 months of the year. For the quarter, revenue grew 70% to over $523 million due largely to same-store sales growth of 45%. This exceptional growth was driven by strong comparable new unit growth of 40% and a mix to larger boats. Additionally, our recent acquisitions of Northrop & Johnson and SkipperBud's also performed well in the quarter. Our gross profit dollars increased over $78 million while our gross margin rose 450 basis points to 30%. Our record gross margin was due to a handful of factors. Among these are improving margins on new and used boat sales due to increased demand; impressive service and storage performance at SkipperBud's, which has a long track record of performance in these categories; Growth in our higher-margin finance, insurance and brokerage businesses, including our global superyacht services organizations of Northrop & Johnson and Fraser Yachts. We would note that the superyacht charter business has remained adversely impacted by travel bans around the globe. Hopefully, with the vaccine rollouts, we will see improvements in the near future. Nonetheless, we are pleased with the current contributions from these businesses. Regarding SG&A, the majority of the increase was once again due to rising sales and the related commissions combined with the 2 acquisitions we recently completed. Interest expense improved in the quarter due to lower interest rates and a reduction in short-term borrowings given the cash we have generated. Our operating leverage in the quarter was 21%, which drove very strong earnings growth, setting another quarterly record with pretax earnings of about $52 million. Our record March quarter saw both net income and earnings per share…

Thank you, Mike. Our team's performance for the first 6 months of fiscal 2021 continues to show excellent execution, even on top of very impressive same-store sales a year ago. We remain focused on creating exceptional customer experiences through our teams, services, products and technology. Our differentiated customer-centric approach continues to ensure MarineMax will meet the needs of the many new customers joining the boating lifestyle, and we will continue to see significant opportunity in our brand expansion and higher-margin businesses. We are active with acquisition and investment opportunities that should strengthen our overall business while staying focused on our long-term strategy. Looking ahead, we remain focused on building our strong team culture, focusing on executing our growth strategy and creating long-term shareholder value. And with that, operator, let's open up the call for questions.

[Operator Instructions]. Our first question comes from the line of Fred Wightman with Wolfe Research.

Brett, you had mentioned that you're expecting the industry demand to remain strong, and I think you talked about high single-digit growth for the industry this year, which is better than that mid-single-digit number previously. As we start to lap some of the tougher comparison last year, it sounds like you guys are still seeing positive trends. But could you just sort of help us frame or set the expectations as we move into the summer months, both you guys and then also as an industry, should they remain positive? Could we see some negative industry numbers? How does that all shake out?

I'll comment and I'll let Mike touch on it. Like we said, the visibility we have, customer deposits and then the demand we're seeing in the stores, floor traffic, Internet traffic, all of those different things give us quite a bit of confidence in the fact that there'll be some growth. However, like I say, we're up against tough comps and growth. Mike, do you want to come on...

Yes. Yes, I just would say, I think the industry overall for of 2021 now is looking -- we'll be talking more along the lines of the growth that we're talking about, and demand continues to be very strong. Specifically, if you look at us, if you look at our 2-year comp stack or our 3-year comp stack, it does indicate there's a potential for same-store sales growth even in the June quarter, which I know is a 37% comp, which is tough to do. And also in the September quarter which is 33%, that's more dollar growth versus unit growth. But I think that it's so strong that there's expectations that the potential is there for back half unit growth for sure.

Makes sense. And just on the inventory, would you mind just running through that organic inventory commentary that you made? Again, I think you said it was close to historic levels on a relative basis. That was down, I think, 36% last quarter. So where is -- I think you said it was close to historic levels on a relative basis. That was down, I think, 36% last quarter. So where is inventory on sort of a like-for-like basis?

[Technical Difficulty]. And which is keeping inventory at lower levels. Without Skipper's, our inventory is probably down in the neighborhood of 55% or 50% on a year-over-year basis. But I think it speaks to our ability to continue to sell in a lean inventory environment and also our ability for our manufacturers to keep getting us product that we can keep driving strong same-store sales growth. We had 33% in September in the lean inventory environment. We had 20% in December. We have 45% in March, which is the leanest environment we've operated in. So I think our team's working great, our manufacturers keep doing a good job getting us product.

Our next question comes from the line of Joe Altobello with Raymond James.

Just want to follow up on the inventory. I'm just curious how your selling process has changed over the past year. If I look at your results, I see revenues up over $200 million year-over-year, I see inventory is down over $200 million year-over-year. And I certainly understand your OEM relationships and having multiple locations helps. But are buyers just that much more comfortable buying a boat they can't physically touch and that they may not get for 6 or 8 weeks?

Yes, Joe. Two things have happened, right? We've invested in some technology over the years that have helped us. I know we keep saying that, but it's a powerful tool. And then we've invested in training for our sales team, which you can't miss out on that, that the sales process change slightly when you have to talk to a customer about both the 30 days away, 60 days, maybe even 4 months away. That process of, in a lot of cases, they're enjoying a boat now, and you can -- through the right process, you can sell them on a future slot or a future order. So our team is doing a great job and the customers are finding a way to accept -- they don't want to miss out on whatever boating season is left. So they're willing to wait. And our manufacturers are doing a good job getting us the products, and we're turning them quick.

Got it. That's helpful. And just maybe on another note, the gross margin. I'm curious if you guys could put the 30% gross margin in the first half into context. How much of that is structural and stays with you in fiscal '22? And how much of that is due to favorable discounting, which may or may not persist?

Yes, Joe. If you go back and look, I mean, we We've been talking about our strategy of higher-margin businesses for a long time, and we kept -- those have been growing, but boat sales were growing as well, which made it tougher. Our acquisition strategy has shown that we're focused in that area as well. So we really have a strategy that wants to get our -- in a normal demand environment, in a normal pricing-discounting environment, we'd love to see our margins in this range, and that's our strategy. But clearly, there's some tailwinds from pricing in the market right now. Mike, I don't know if you want to comment on that?

Yes. We've gave this information in the last quarters and the quarter before. Roughly 1/3 of the increase on a quarter-over-quarter basis is coming from new and used pricing. The rest of it is what Brett said, it's the strategies we have around our higher-margin businesses. It's Fraser contributing, it's Northrop & Johnson. It's the higher margins coming from SkipperBud's, which all that's sustainable into the future. It's roughly 1/3 is the pricing components you're probably asking about, Joe.

Okay. So it hasn't changed Got it.

Our next question comes from the line of Michael Swartz with Truist.

Mike, just wanted to touch on guidance. I know we go through this pretty much every quarter. But as I look at your guidance and then what you've done in the first half of the fiscal year, It does look like you're implying some sort of slowdown in incremental margins in the back half of the year. And I know we just had the commentary around gross margin. So maybe give us a sense of what -- how to think about incrementals in the back half of the year relative to the first half? And then what are some of the puts and takes in that guidance?

Yes. I think part of it is we've still got our biggest summer selling season ahead of us. So we're being somewhat prudent in our guidance. Also, though, when you look at the back half of last year, we do get up against tougher gross margin comparisons for sure in the September quarter. Obviously, it's our intention and our team's intention to keep driving strong gross margin growth, strong flow-through. But I think as you're modeling the business, I think what we've done from a guidance perspective is probably the prudent way sitting here today looking at the next 4 or 5 months.

Okay. Great. And maybe just secondly, on your backlog today, maybe give us a sense and a little more granularity. I mean how much of that is maybe presold versus units being sold out of inventory that just haven't been transacted yet. Maybe how that looks relative to last year at this time as well.

No, good question. Well, obviously, last year was -- I think we had $500 million of inventory when we ended March. So we had much more that would be sold on the ground than we do now. So more of it's presold not in our stores, but coming. But again, the manufacturers and our teams are doing a great job staying communicated with our customers as the dates when their boats are coming in, scheduling deliveries, getting the boats really as fast as they come in, they're going out. And so it's kind of a healthy model, quite frankly. Inventory is sold, it comes in and goes out. So no, a greater percentage for sure is going to be sold on order coming in than on the ground, just given where inventory is today.

[Operator Instructions]. Our final question comes from the line of James Hardiman with Wedbush Securities.

Great quarter. Really encouraged by I think most notably what you think is going to be your ability to sort of comp the comp, right, to put up positive growth on top of last year's really strong growth numbers in the back half of the year. I guess little doubt that the demand is there to do that. What does it assume about incoming shipments for manufacturers that you're going to be able to comp that comp? Does it assume similar pace of shipments coming in the door versus what you've seen in the last couple of quarters? Does it assume a step-up? And is there any risk to that guidance if supply chain issues sort of come up the system?

Yes, that's a great question. And we really have such a clear visibility to our manufacturers. We're communicating with them regularly, along with the data transfers to look at things. So we have a clear sight on bots that are being built for these customers for sale, some for stock, when will they land literally to the day. And so I'd say we have great visibility on those products. There's always risks to outside factors that could affect those boats getting here. But like we've seen in the last couple of quarters, we watch it close. The boats arrive within that time frame, and we get them delivered to customers. So I'd say we have great visibility to the arrival dates. Some risk to outside factors.

Do you feel like you're losing out on sales as a result of a lack of inventory? I mean, it's hard to knock 45% same-store sales growth. But do you think that number would be even higher if you got the inventory that you wanted? And does that become more difficult in the bigger quarters to come?

Yes. I mean clearly, if we had more inventory right now in this high-demand period, you'd probably transact more boats right today. But we have a lot of boats incoming. And like I talked about, our sales team is trained, and it looks like we're getting about every sale we can get. And even in some cases, people might have a preconceived notion of a boat they really wanted that's sold out, let's say, for 6 months to a year, And there's another boat that meets their needs just as well. And so we're able to move people to something like that. Still a great boat for them.

And so that's -- I think if you look at the -- specifically, if you look at the industry trends and our key categories, our growth rate is considerably higher than the industry's growth, which would tell you we're doing better getting product from manufacturers, and our team is handling it better and we're delivering more. So I don't think we're losing a sale necessarily just to someone down the street. So I think we're in probably a better position, quite frankly

Got it. And then just last question for me. As I think about this high-teen same-store sales guidance -- Well, I guess two questions. A, can you give us a total sales -- what's the total sales number assumed? Obviously, you've had some acquisitions in the past year. So what does the guidance assumed for total sales growth? And what's the ASP component to that same-store sales growth number? I think it was -- ASP was about a 5% benefit here in the second quarter. If memory serves, I think it was a headwind in the first quarter, but how should I think about that for the full year?

Yes. Actually, I don't have the total sales number right at my fingertips right now, but it'd be a high-teens overall same-store sales growth rate that's going to be driven by units at the end of the day. I mean, there's going to be a component of AUP that -- the exact mix of that's a little tough to predict. But it's going to be unit-driven, which is speaking to the demand that we're continuing to see out there.

Our final question comes from the line of Colton West with Longbow Research.

Congrats on the strong quarter.

Thanks, Colton.

I guess, to start out with, do you see the industry getting back to sort of the 2010 level of 300,000 retail units annually? And if so, if that were to happen in the next few years. Is there sufficient capacity in place to be able to meet that level of demand that would be required to get there?

That's actually a great question. So I think anybody in the industry is going to tell you that, yes, we see the industry getting back to those levels. I mean, we see the demand. We see people out there on the water and boating. We see what boating does for families and their friends and so forth. Does the industry have the capacity? That's a good question. I believe it does. I don't believe there's been that many manufacturers that have gone offline. It's a good question. So I believe that it does and/or it will add it. I don't think it's that expensive to open up boat manufacturing facilities in terms of the physical facilities. Obviously, it takes time to get the team and the molds and all that stuff to build the right boats. But a great question.

Okay. And then I mean, you guys mentioned like really strong growth. I mean, pretty much all around, right? Leads, web traffic, same-store sales of quarters, it doesn't really matter where you look. But what gives you more confidence that you're able to sustain these levels of demand even against the tough comps and even next year, when you think about what the 2021 comp is going to look like?

Yes. It's as basic as a guess. The waterways, where waterways are open, are packed. People are boating. They're loving the lifestyle, they're getting involved. There's this new layer of customers that want to upgrade. There's more people in a canal in Florida that have a new boat, and everybody sees it drive and by the canal, it's just -- it's infectious. And it's really turning on to be a great alternative for people to stay close to home and with their family and friends and enjoy the boating lifestyle. That's a real basic answer, but it's truly what we're seeing. And if we weren't seeing as many people out there using their boat, of course, then you start wondering how long will that stay? But they're out using their boats a lot.

Yes. And then is that momentum still being fueled primarily by the first-time buyer? Or are you starting to see those buyers who maybe didn't buy in 2020, come back to market now that maybe inventory was able to come up a little bit in the off-season months, but I see probably the March retail number reverse that pretty quickly.

It does move around a little. We are seeing some of those buyers that didn't buy in 2020 that have had a boat and they finally got on order what was -- what they had been wanting. But the level of new boaters coming in remains high. It still remains pretty high.

I'd like to turn the call back to management for closing remarks.

Well, thank you, everybody, for joining the call today. And both Mike and I are available all day if you have any questions, feel free to reach out. And we'll look forward to speaking with you on our next quarter.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.