Good morning and welcome to the MarineMax Inc. 2022 Fiscal First Quarter Conference Call. Today's conference call is being recorded. At this time, I'd like to turn the call over to Dawn of ICR, Investor Relations for MarineMax. Please go ahead.

Thank you, operator. Good morning everyone and thank you for joining this discussion of MarineMax's fiscal first quarter 2022 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 e-mail 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. Please go ahead 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 remind 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?

Thank you, Mike. And good morning everyone and thank you for joining this call. Let me start by thanking the MarineMax team for their continued focus and commitment, which drove record sales, record cash flow, and record earnings growth in the quarter. On top of these great financial results, our Net Promoter Customer Satisfaction level hit another new record. This is the most important achievement of all, as it will drive many years of future sales and profitability. Today, I'd like to share highlights from our first quarter, touch on how we are strategically approaching the important peak selling season, followed by a discussion of the results of our strategic growth plan. Then, Mike will discussed our financial results in greater detail and provide some color on the balance of the year. Q1 results were a great achievement given the extremely lean inventory and well-documented supply chain issues. With the peak selling season ahead we expect to build on the strong start to our fiscal year and remain confident that we will continue to enhance long-term shareholder value. Let me touch on the December quarter where we generated 15% revenue growth, record gross margins of 35% and record earnings per share of $1.59. I'm extremely pleased that our diversified model enabled us to again exceed expectations as we produce robust margins and earnings growth. For the quarter, we are particularly pleased with our strong same-store sales growth, which rose to 9%. Its important to note that our same-store sales growth was primarily driven by an increase in unit sales, which is notable given the industry-wide supply chain challenge. Additionally, we drove meaningful expansion across essentially all brands categories and geographic region. The Marine industry continues to experience consumers embracing the boating lifestyle. This strong demand environment is highlighted by a…

Thank you, Brett. And good morning again everyone. I'd like to also start by thanking our team for producing another record quarter driven by strong same-store sales growth, gross margin expansion and great operating leverage. For the quarter, revenue grew 15% to $473 million largely due to same-store sales growth of 9% and the contribution from our various recent acquisitions. Our 9% same-store sales growth was driven primarily by unit growth, which is impressive given the continued industry-wide supply chain challenges. Overall, our growth has been demand driven across generally all segments of products and every global market. A big takeaway from our results this quarter is our ability to post very strong comps on top of already strong comps. Our 9% growth this quarter was on top of 20% and 24% the last two years, which were also largely unit driven. Our gross profit dollars increased over $43 million, while our gross margin rose 540 basis points to over 35%. Our record gross margin was due to several factors. Among these are improving margins on new and used boat sales, impressive service parts and storage performance, expansion in a higher margin finance, insurance and brokerage business as well as growth in our global superyacht services organizations of Northrop & Johnson and Fraser Yachts. Our higher margin businesses have been a focus of ours for some time including our acquisition strategy. Only about a third of our margin improvement in the quarter came from growth in new and used margins. The remainder was expansion of our higher margin businesses. Regarding SG&A, the majority of the increase was again due to the increase in sales and related commissions combined with the recent acquisitions. We believe SG&A overall is generally on track on an annual basis, but we will watch the inflationary…

Thank you, Mike. MarineMax continues to benefit and capitalize on the surge in demand and the desire of consumers to embrace the boating lifestyle. Our team's performance to start the fiscal year has shown continued excellent execution, even on top of a very impressive same-store sales a year ago. The original vision for the creation of MarineMax was to create a better customer experience by building a team that is dedicated to the passion and lifestyle of boating. We continue to work hard to deliver on this and this is the success of our model. We remain committed to the long-term financial strength of the company and will pursue additional brand expansions and higher margin businesses to support our strategy to create long-term shareholder value. And with that, operator, let's open up the call for questions.

Thank you. [Operator Instructions] Our first question comes from the line of Fred Whiteman with Wolf Research. Please proceed with your question.

Hey, guys. Good morning. Thanks for the question. Maybe just to start. Could you touch on -- I guess that it's tough to predict sort of the unit delivery cycle. But can you talk about the unit number that's included in that January same-store sales commentary, which you are expecting to be positive. It's just moved around a lot. So, how should we think about that?

Yes. Good question, Fred. We don't really give on a month-by-month basis. I know we do say that we're going to have same-store sales growth as January closes up. And actually I don't recall right now, really if it's going to be up or down. But I would tell you that we've had some -- in the December quarter we had some good supply chain activity positive, which is how we had the unit growth in the quarter. However, I think the message is, is that there's still some choppiness out there and it seems like it's a different problem on any given day with each different manufacturer. So, I think until we move more through these seasonal quarters, I think our guidance number of flattish until we get further into the year probably makes the most sense with the uncertainty.

Okay. That makes sense. And you guys both had positive comments on sort of the medium and the long-term outlook for the business. And I know that you guys have historically been active on the M&A front. But could you just sort of touch on the potential to lean into the buy-back here just given the valuation and sort of how the stock has performed, especially since I think that's set to expire in March of this year. So any thoughts that would be helpful?

Yes. You can imagine we have a 10b5 plan in place that would be buying it as prices drop. And we're aware when the current plan expires. And we would be at least talking to our board about reactivating that plan before it expires. So, we're aware of those dates. I'd say that, we've been public for a long time and there's been other times where the valuation of the company gets dislocated from what it should be reality. And in those time periods we've always been a little more active in our share buybacks. We do continue however to look at into the long term and about good strong businesses to bring into the company with good strong management teams. So, it's a balance of what's happening right now from a valuation perspective, as well as where we're trying to take the company long term. So, I think we'll be looking at both avenues. Obviously buy back some stock going to makes sense and continuing our discussions with different opportunities to expand the business and grow it for the long term.

Great. Thanks guys.

You're welcome.

Our next question comes from the line of Eric Wold with B. Riley Securities. Please proceed with your question.

Thank you. Good morning, Brett, Mike. Obviously, great same-store sales, which obviously can be influenced somewhat by satisfying past orders getting delivered to OEM, by OEMs as kind of a supply chain opens up. Maybe it gave great deposit numbers and growth sequentially. Maybe just kind of anecdotally, anything you're seeing kind of real time in terms of dealer traffic, the mix of first-time boaters coming into dealerships, stock market choppiness, requests around deposits. I mean, anything that kind of would give you pause in terms of where we are in kind of the demand cycle?

Yes. Eric, it's Brett. It's a great question and we monitor almost all those things you listed literally on a daily basis, website traffic, lead generation, everything going on the website and those numbers continue to be very strong, which is just -- we're watching it close to look to see if, okay, when will this kind of settle down a little bit. But demand is still strong. We watch first time to MarineMax buying boats. We watch that percentage. And it still remains high, which is a great news for the industry, new people coming into boating. And so, the only little thing out there that we watch and this is just common, is some really hot models that have an extremely long time frame to wait to get a boat. I would call those cooled off, because if you can't get a boat for two years, that model. But I would tell you, we still have activity around some of those models, it's striking. So we watch that a little bit. So, to finally answer your question in summary is demand and traffic everything continues to be very strong.

I'll let - actually I'll add one comment to what Brett saying. And I said it during my prepared remarks that our customer deposits are up 300% from a year ago and the 12 months leading from then till now were a pretty good 12 month period for the marine industry and for us and our deposits are up 300% going forward. Our deposits are up about 50% from September. So just from three months ago our deposits are up 50%, during a quarter where we actually produced same-store sales growth. So we think about how that math works. Deposits are leaving the balance sheet as we're delivering the boats. We're adding deposits to actually build the deposit line by 50% in one quarter and also have 9% same-store sales growth. I think should let people know demand is still pretty good in the recreational marine retail environment.

Perfect. And then just final question. Inventories up 40-ish percent sequentially. Are you getting stock inventory back on the floor? Is that kind of transitory inventory that kind of hit your balance sheet that was kind of going out to already purchased boat buyers kind of in this quarter? How would you kind of frame where your floor inventories are maybe on a percentage basis versus kind of where you'd like them to be?

I was actually expecting a question about that from sequentially, but -- so there is some, I'll say, very modest building or increases in inventory when you add up all of our locations. Yes. We have a little bit more inventory on the ground seasonally today. What's also in that number are deposits, because as our customers are paying us deposits, we do pay some manufacturers deposits for boats that are coming a year from now or 18 months from now. So that's in there. So that's not something we can deliver today. Then technically, you're right, in the December quarter, we had boats coming from international suppliers. So they're literally on the oceans that are coming to us for delivery hopefully during the March quarter, but -- and so that again is products you can't actually deliver right then, because they're out in the ocean. So, it was -- those handful of things made it look like we may have actually more inventory in our stores, because trust me, it's still pretty lean in the store environment.

Yes. When you break it down and look at what's on the showroom floors other then maybe some more entry -- not entry level, but maybe they'll call them pontoon boats in the northern market. That -- shy of that there -- I'd say, there's less boats for sell available in each store.

Very helpful. Thanks guys.

Thank you, Eric.

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

Thanks. Hey, guys. Good morning. First question is the follow-up on Eric's regarding inventory. Given your revenue guide for 2022, can you guys expect to end the year with inventory up versus 2021 or flattish?

It’s a good question. I do -- I've kind of gone with what the industry is saying, what people are talking about that. I think the expectation is sometime during the summer the supply chain issues hopefully will get better. Although, I'm not really sure if anybody really knows. I think everybody just kind of hunting the answer till the end. But if supply chain gets better I think technically we'll probably have some more inventory, but it still going to be extremely lean and if you walk at any one of our locations. And with the backlog just about as fast as it gets here inventory is going to be going out. But I think -- I would think technically if the supply chain does get a little bit better and if we end up seeing better unit growth then maybe what in our guidance and yes, there could be a little bit more inventory on the ground.

Okay. In terms of the EPS guide you raise the midpoint by about $0.45. What's baked in for Intrepid and Texas MasterCraft in that number? Doest that wasn't in the old guide?

Yes. Good question. There's a couple analysts have come out there and they put numbers out from $0.15 to $0.25. And I think when you look at the cash that was used to make the two mergers, we've baked in around $0.20 for both those for the full year. Both businesses are performing well. Texas MasterCraft's a little more seasonal. So we had it for two months and the quarter. Intrepid's doing great and certainly glad to have them on board. But yes, thanks for asking that. And in the quarter, I did comment there was a little bit of contribution from both, less than a nickel, just given some of the costs to acquire them that also were in the quarter, but thanks for asking that Joe.

Got it. And just one last one if I could. You guys own a fair amount of Florida waterfront real estate. And as you're well aware it's done very well from a price standpoint. I know you've started to monetize a portion of that. But do you have any plans to do more of that in 2022 and beyond?

What we constantly look at our balance sheet and look at how we're -- how we best leverage the company, we are always exploring different ideas. I wouldn't say, there's a hardcore plan in place. But your point is accurate. We own a lot of real estate. We actually bought some more this quarter. And we do think the fair value greatly exceeds what it's on our books for. So we're very -- we think that's a great long-term strategy for this business. So, I think you'll see us continue to buy great unique waterfront properties especially if we can do storage on them. And I think you'll see us -- we're not going to -- we're not going to buy a property that's necessarily at top of the market. We'll try to get properties at the right valuation, which is what all of ours have been we believe. But there's a lot of capital and a lot of potential capital that's tied up in our real estate for sure.

Okay. Got it. Thank you guys.

Thank you.

Our next question comes from the line of Mike Swartz with Truist Securities. Please proceed with your question.

Hey, guys. Good morning.

Hey, Mike.

Mike, maybe just on guidance, I think you had mentioned your guidance is predicated upon operating leverage kind of in that more historical range. I think you've talked about maybe 12 to the mid teens historically. You did 26% this quarter. I think over the past five or six quarters you've averaged something around 20%. So, I think its just a sense of why you think that 12 to maybe mid teens is more correct going forward relative to what we've seen of late?

Well, your point of late is accurate. I mean, of late, our flow through has been really strong including 26% this quarter. Really 2021 was a breakout year from a model perspective where margins went - our hope is that as we go through this year we can update guidance and we'll be more successful on the overall flow through of the business, which if you think fundamentally as margins arise it should be there. I think we're just probably being a little prudent since early in the year. And we certainly hope to be able to update that target as we move throughout the year. Then fundamentally, as we finish the second year, let's say, we finish 2022 with strong margins and we're looking at the different acquisitions we've done, we've got to start thinking, okay, does that 12% to 17% actually now, has it changed because of -- I think Brett said it. The margin profile of the company I think is changing, even if you take away the upside that we're seeing today on new and used product, I think each quarter I say, something like of our margin improvement around a third-ish has been new and used, which means two-thirds have been coming from the changes we've made in the business, whether it's growing up an high end storage or some of the acquisitions that we've done that have a higher profile. So, we're trying to evaluate all that and to be able to direct and give you guys guidance around what's the model changing to. Is it 26% flow through in 2022. So, part of it's kind of early in some of these acquisitions we've done. And we hope to be updating that as we move through this year and in the next years.

Okay, great. And maybe on a related topic in very near term, just the current quarter, the Miami shows a couple weeks away, and obviously that didn't occur last year. So I'm just wondering how we should think about maybe adding some costs back relative to last year just from that show?

It's a good point. I mean, there would be some incremental marketing costs, but yes, I think for that we also have a lot of shows going on right now around the country that we're not attending. So, I think we've tried to put a different balance on things on what we're going to. So, a lot less shows that we're going to this year because there's no inventory and pipelines full, all the reasons you know.

Okay, great. Thank you.

Thank you, Mike.

Our next question comes from the line of Gerrick Johnson with BMO Capital Markets. Please proceed with your question.

Great. Thank you. Good morning. I was interested in model year price increases, like-for-like price increases on existing models. And then, if that is up, I assume it is. How confident are you about consumers ability to pay higher prices going into 2022?

It's a great question. I think we've touched on this a couple times on calls. I'd say, high single digit in some cases there's maybe a double digit increase on it. If you're looking at kind of what's selling like in June versus -- like June 2022 versus June 2021. And the demand that we're continue to see, I'll make a comment on our backlog, obviously, what we're writing contracts today is on product that has price increases. And the -- I think the demand for the boating lifestyle and to get out there and enjoy things with your -- boating with your family and friends is today stronger than what the price increases I've seen. So, it continues to be strong.

Yes. We watch it very closely. We're very sensitive about our pricing. We watch to see if there's any volume decrease as some prices increase. And so, we'll watch it. The good news is the brands and the models we carry. Even within one brand there's so many models that can fulfill the same boating need for a customer. So maybe they -- two years ago they wanted a 35-footer, a 31-footer has a lot of great features and the same benefits. Just so, as the years evolve we've got enough product to hit whatever price point the consumer feels comfortable with. But we're watching it closely.

Okay. Then, I realize this might be overly simplistic. But if your same-store sales are up 9% and basically units, you're seeing high single digit price increases. So, it would be safe to assume you're selling more lower priced boats in the fourth quarter?

What it's -- technically it's a mix. For the fourth quarter I would confirm that we delivered probably a greater percentage of a smaller product and it really has to do with people have been waiting on their boats and it's just when that, when we got them from the manufacturer. So on a year-over-year basis we did deliver a greater percentage of smaller product than we typically do. The December quarter is typically a quarter and so is the March quarter to a degree that is skewed by a larger product primarily coming out of Florida as northern markets cool down. But today it doesn't matter where the consumer is. If they're in Minnesota or Florida, if their boat is available and if it's finished at the manufacturer, they take delivery and then we recognize the sale. So, it's kind of smoothed out some of the -- maybe some of the seasonal pattern as the boats are coming off the line.

Okay. I see. Great. Thank you very much.

Thanks.

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Thank you all 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 look forward to talking with you at our next call. Have a great day.

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.