Good morning, and welcome to the MarineMax, Inc. 2022 Fiscal Fourth Quarter and Year End Conference Call. Today's conference call is being recorded. At this time, I would like to turn the call over to Dawn Francfort. Please go ahead.

Thank you , operator. Good morning, everyone and thank you for joining this discussion of MarineMax's fiscal fourth quarter and year end 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 would now like to introduce the management team of MarineMax; 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 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 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?

Thank you, Mike. Good morning, everyone and thank you for joining the call. I have to start by thanking the MarineMax team for their extraordinary achievements in fiscal 2022. We achieved record revenue of more than $2.3 billion and expanded our gross margin to a record 35%, as customers continue to seek the boating lifestyle through MarineMax. Our exceptional team generated outstanding adjusted earnings per share growth of 33% to $9, which greatly exceeded the high end of our initial fiscal year 2022 guidance. We successfully navigated ongoing supply chain headwinds, broad macroeconomic pressures of rising interest rates and record inflation along with the devastation caused by Hurricane Ian at the end of the fourth quarter. On that point, our stores are operational all of our team members and their families are safe and they are already rebuilding. Our thoughts and prayers are with all of those in the communities affected by the storm. We remain committed to engaging with our customers and the communities that require much-needed assistance. Our team and the Southwest Florida community are resilient and both will come back stronger than before. Today I'd like to share highlights from our fourth quarter and full year followed by a discussion of the results relative to our strategic growth plan and then Mike will discuss our financial results in more detail and provide color on our fiscal 2023 outlook. For the quarter, we generated 16% revenue growth gross margins of 36.7% and record earnings per share of $1.90. This is a very strong quarter and more noteworthy when you consider that we along with many other businesses had to overcome the hurricane shutdown of our biggest market in the last week of the quarter. Our same-store sales for the quarter grew 11%. Demand remains strong, which is driven…

Thank you, Brett, and good morning again everyone. I'd also like to start by thanking our team for their strong efforts that produced another record quarter and outstanding year. For the quarter, revenue grew over 16% to $537 million, due to same-store sales growth of approximately 11% and contributions from recent acquisitions. Our same-store sales growth was driven by an increase in our average unit selling price, mostly due to the migration to more premium or larger product, as well as price increases. Our units were off in a mid-single-digit range, due primarily to less aluminum boat sales, lack of product and unit implications in Florida due to the inability to deliver boats caused by Hurricane Ian. It is noteworthy that we were able to drive strong same-store sales growth and margins despite the hurricane and remaining supply chain challenges. It speaks to the demand for the boating lifestyle, the strength of the premium segment and our team's ability to find ways to persevere and outperform. For the quarter, our gross profit dollars increased by over $22 million and our margin stood at a very strong 36.7%. Our margins overall continue to benefit from our higher-margin businesses. However, the year-over-year change as a percentage was entirely driven by mix. When boat sales increased as strong as they did 11% on a same-store basis, it's a challenge for our higher-margin segments to keep up. So, on a relative basis, margin as a percentage often declines, but it typically results in strong profits, as we showed in the quarter. Interestingly product margins actually expanded in the quarter. Another great sign and testimony to the strength of our team and strategies. To be clear, our higher-margin businesses keep performing well. Regarding SG&A, the majority of the dollar increase was once again due to…

Thank you, Mike. As I stated at the beginning of this call, our team's performance in fiscal 2022 demonstrates outstanding execution as our diversified model and exceptional customer service generates sustainable growth. The original vision for MarineMax was to create a better customer experience by building a team that is dedicated to the passion and lifestyle of the boating community. This is the basis of the success of our model and we will continue to work hard to deliver on this vision. Today, MarineMax is a highly diversified marine business, focusing on a high net worth resilient customer base. The higher gross margin profile has elevated MarineMax's earnings power to withstand a choppy economic cycle. We remain committed to the long-term financial strength of the company and creating sustainable shareholder value. And with that, operator, let's open up the call for questions.

At this time, we will be conducting a question-and-answer session. [Operator Instructions] And our first question comes from the line of Fred Wightman with Wolfe Research. Please proceed with your question.

Hey, guys. Thanks for the question. Just on the hurricane-related impact that you called out in the quarter. Can you just explain what exactly is in that number? And then looking forward, how we should sort of weight the relative impact from the fiscal fourth quarter relative to the fiscal first quarter and beyond?

Hey, Fred. Thanks for the question. The $4.8 million in the press release is literally just the estimated damages from the storm. It's not the -- clearly, we had some boats that we could not deliver, because the state was shut down for the week, the last week of September. So, the $4.8 million is only costs. The weighting from the storm -- in terms of weighting it through each quarter, there's going to be an impact as Fort Myers and that area rebuilds. My guess is that it gets less so as the year goes on it maybe a little more significant early on. Of course, earlier on we get the benefit of the delayed sales coming in, obviously, to this quarter, which probably just about may offset the impact of the Fort Myers store operations. It's a little bit hard to tell. But I think as the year goes on down there and the infrastructure is rebuild, there'll be better opportunities for that area to recover even faster.

Makes sense. And then on the unit outlook that you guys gave for 2023, I just want to make sure, confirm that that's a fiscal 2023 versus a calendar 2023 comment? And then maybe just walk through how you sort of got to that mid-single-digit industry number.

Yes. It's -- what we always start off is what's the industry is going to do based on best estimates and current trends. So we started by saying, what's going to likely happen to 2023. And with the units, I tried to explain what's happened. 2020, the industry sold through inventory. We had a real high unit retail number. 2021, the industry was really starved for product. So, the units that were registered dropped. 2022, they've again dropped largely at least in the first half of the year because of lack of product. Maybe now in the second half -- I'm talking industry -- calendar year, the second half could be a little bit of economic issues along with still product available issues. So the industry is going to drop down below or about the 2017 levels. We just don't think it can drop a whole lot further than that but where the risk is we think is in the value segments and there's a lot of units sold in the value segments. And our best estimate is the industry is going to be down in that mid-single-digit range, probably above 5% but not at 10% in terms of units and that's an estimate. And if it is, that could have some impact on us. And so then we convert that to our fiscal year basis. And with the migration to the larger product, higher price points plus inflation, we're going to be in the flattish same-store sales for 2023 is our best outlook today.

Great. Thank you, guys.

Thanks.

And our next question comes from the line of James Hardiman with Citi. Please proceed with your question.

Hey, good morning. So maybe just picking up where we left off with respect to sort of units versus ASP. We continue to see really good ASP or continued to see really good ASP in the fourth quarter sort of a low double-digit number it seems like – or actually I guess maybe closer to mid-double-digits or mid-teens. How do we get from here to there? Do you sort of assume sort of a slowing ASP contribution as we work our way through the year, where do we finish the year? Is it sort of flat by the end of the year, or do you think we're going to continue to be in sort of growth mode there? And I guess more broadly how do you think about the promotional environment? Obviously, the last couple of years you haven't had to promote and discount very much. Is there any evidence that that is reintroducing itself into the industry. And do you expect that to remain the case going forward?

Yes. James, I'll try to explain it. On the quarter you're right. For the fourth quarter we had a very strong contribution from migration to larger products. On the full year it's not as strong. We were up, 5% same-store sales overall. The contribution from a price point and migration is probably more in the high single-digit maybe double-digit range. I don't have that right here in front of me. But it's very likely that AUP will continue to expand for us especially as the premium segment keeps doing better. We just felt it was prudent today to stick with the – probably less contribution in 2023 from that that may play out as the year progresses.

And I'll talk about promotional activity. I think it's going to be very selective or within certain segments or models or you've seen some softness in the data out there on certain lines of both. I think that's where we'll see a little bit of it. But in kind of the upper end more premium stuff we're just not seeing it right now.

Makes sense. And then just one follow-up. You talked about October being up on a same-store sales basis. Maybe using the fourth quarter as a baseline right units down mid-single digits, pricing up mid-teens. Similar trends that we're seeing in October, better, worse in either of those categories. How are you thinking about October?

I've not actually studied it to that level of detail. I would tell you that the – we are clearly seeing premium larger – and most – a lot of what we sell by the way is premium but we're seeing strength in the premium segment, which could imply that October could be continued how the fourth quarter went.

Got it. It was helpful. Thanks, guys.

Thank you, James.

Thank you, James.

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 on IGY. Mike I want to make sure I heard your numbers right. So you're saying IGY is going to do a little over $100 million of revenue roughly $40 million of EBITDA but just $0.10 of EPS accretion at 2023. So why isn't that $0.10 number larger I guess is my question?

Well, on banking and financing on the $400 million of debt, which takes a chunk of the earnings away. And then also the depreciation, when you level set all the assets and allocate the purchase price, you've got to revalue all the docs and all the facilities and all of that. And so part of it is how the purchase price accounting works so you get a higher depreciation charge. So I think in the future what we'll be doing because we've amassed so many marinas as we'll be trying to give you guys a little more color around how that marina business is trending and whether we get to an EBITDA number going forward or whether we start showing you some additional statistics on that business. We'll be breaking that out for you. It's obviously -- it's a great strategic merger for us and touches so many pieces of MarineMax in so many synergies. And obviously as we work the debt down the interest goes away which is nice. But that's why it gets down to a relatively low EPS contribution, but a strong EBITDA contribution.

Got it. Okay. And then maybe on gross margin. I think you mentioned you're looking for sort of a mid-30s gross margin in 2023. Kind of help us -- walk us through the puts and takes on that. It sounds like you're going to be stitching some mix shift toward larger product which has to have a lower margin. So what are some of the good guys and bad guys from a margin perspective that you're seeing this year?

Yes. You know what it's pretty simple. One you're going to get a nice benefit from IGY. So most marina businesses their gross margins run low 60s to low 70s or mid-60s low 70s something like that from a gross margin perspective which is great. So we get a benefit of that. IGY as big as it is relative to the size of MarineMax is going to have a positive impact but it does mesh into our numbers nicely. So we'll get a little bit of benefit from IGY, but then we're just assuming some modest price erosion driven primarily coming from the value segment. But obviously we assume it may creep up a little bit from a prudence perspective. We think our higher-margin businesses are going to keep doing great and there's probably some upside there. But there's not a whole lot of other moving pieces in our modeling for 2023 other than just removing a little bit of the price increase that we've seen in these last several years on product.

So basically, gross margins flat year-over-year with some growth in SG&A relative to sales?

Yes there's a little growth in SG&A. You also have to take IGY out for a minute which has its interest on its financing. The core company's interest is also going to go up. We've been operating for the last couple of years very low inventory, very low rates. Inventory is going to rise. So the interest expense for the rest of MarineMax is going to go up in 2023 as a percentage it's going to go up significantly. Absolute dollars to us anymore it's not all that material but it's going to go up and a little bit of an uptick you're right on the SG&A line.

Okay. Thank you guys.

Thank you, Joe.

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

Thanks, good morning guys. Just a couple of questions. One kind of a follow-up. On the value category of boats, we are starting to see some weakness. Can you frame -- I know if [indiscernible] you frame the percentage of units or revenues those are historically representative of how we should think about that kind of in fiscal '23. And then for those customers that are looking to finance has there been any change in approval rates within your target demographic?

Yes there's -- I'll just mention I'll answer the last question first. There's not been any change in approval rates. I mean obviously interest rates have gone up. But the way the banks approach underwriting and the way they approach the business is basically the same as it's been. And obviously the industry has been stricter when it comes to underwriting for years and years now. So they're just following the similar approach. And your question on value. Value units are going to be a greater percentage than dollars, I'd be taking an educated guess at 15% to 20%. I don't know -- most of our business is not what you call value.

Yes. And Eric I think some of what we're trying to get our arms around to is there's a little bit of more of a return to a seasonal buying pattern that went away during that spike where people were just buying all year long, pretty flat purchasing and now maybe some return let's say in the Midwest people kind of get back to maybe more purchasing in the spring. So we're trying to get our arms around that as well.

Got it. And then just last question. Following the IGY acquisition, have you given any thought as to kind of how much of the business, the overall company you want to eventually come from non-boat sales and the higher-margin recurring businesses over time, maybe set you kind of internal goals towards a percentage, or is it more just opportunistic as they come along?

Yes. I think no we haven't put a specific percentage in our strategy, that we want to get to, but we have for now several years said, we want to keep growing these higher-margin businesses and they're performing well for us. So I will say that the -- we kind of used the words and the platform IGY is a new growth platform, for our company and we'll continue to look at I would say, maybe even less than opportunistic we'll be looking at growth opportunities there as well, as our other growth platforms. So, yes, it's -- I don't have a number, but we do have a new platform to grow the company with.

Thank you, both.

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

Hi, guys. Good morning. Maybe wanted to maybe look at margins from a longer-term perspective your businesses mix has changed quite considerably over the past three or four years. So under the assumption that we go back to new and used product margins that we saw in maybe the 2017, 2018, 2019-time frame. What do you think your gross margin, would look like in that scenario, given some of those changes?

I've said through a lot of these – Mike, first of all thanks for the question. I've said a lot on these calls, the impact of the product margin expansion, as a mix to our overall margin growth. And just on average, it's been probably about one-third, responsible for our product margin growth. So if you take like the current year, we're up call it 35 points -- 35% used to be 25%. So let's say, we're up 10 basis -- 10 points of margin overall. So one-third of that generally, is because of the elevated new and used margins. So almost seven of those 10 points, would be because of the structural changes by adding Fraser, Northrop & Johnson. Adding the businesses, we've added including even like SkipperBud's and storage business that we've had Nisswa storage business now IGY. Plus, focusing on growing our finance and insurance business, and our internal marina business and the other parts of our business which are higher. And all of that -- all those businesses are operating at normal margins for those segments. So it's not like those margins have been elevated, whereas boat margins have been elevated. So it helps us to get our head around, if margins were to return the business overall has a much higher margin profile, which is what Brett said a little while ago and that's been our focus. So -- and we're not necessarily, on board with margins return back to the way they used to be so...

Yes. Mike I was going to add that with a reset to zero inventory, which we've never had in the history of the boating industry, we don't think there's a need to model back to those margin levels for new and used boats. So that's our goal working with our manufacturers and in the right inventory levels, we don't think we need to return to that by any stretch.

Okay. That's, helpful. And it sounds like worst-case scenario is probably low 30s. Does that sound generally, correct?

Yes. I mean, that's how the math would work. Yes. That's how you get to a much different margin profile company by design.

Got you. And then, just second question on inventory levels. And I think Mike you gave some good color on maybe the like-for-like or comparable store inventory units, versus pre-pandemic. I think, if I read that right you're down about 63% or so...

Like-for-like stores. So you take the stores, we owned in September 2019 they have one-third of the product today or 63% or 6% less. Yes.

Is there a way of looking at that from just the standpoint of maybe smaller boats, or lower end boats to be sub-30 feet versus over 30 feet like, what that looks like? I mean, I would assume you're -- that number is a little bit heavier on the smaller side, but just any color you have on that?

Yes, it's going to be skewed towards smaller product -- pontoon product some smaller fiberglass product that's maybe easier to build for the manufacturers. They're building more per week. So it's easier to get into our stores. The larger product and again the more premium product is still very much in short supply I think for us and likely for the industry.

Okay, great. Thank you.

Thanks Mike.

And our final question comes from the line of David MacGregor with Longbow Research. Please proceed with your question.

Hey good morning. This is Joe Nolan on for David.

Hey Joe.

Hey Joe.

Most of my questions have been answered. I was just kind of wondering what you're seeing in terms of used boat values right now and just how the used boat market is trending in terms of inventories as well?

Yes. Good question. I'll take a quick stab and Brett can chime in but I think used boat values are holding up really pretty nicely. On late model used boats are hard to find.

Yes, I mean we probably see a little bit more availability than we would have a year or two ago, but it's still -- the market is holding up really strong.

Got it. Okay. And then also just on capital allocation. It sounds like you guys are still open to M&A and still actively searching the pipeline there. But just given where the stock price is at currently just wondering how you're thinking about share repurchase? And then on acquisitions is there any change to your priorities going forward?

We -- one I think we've said a couple of times on calls we'd love to buy great companies with great managements at a reasonable and fair valuation. We think that makes a lot of sense for the long-term growth. We clearly recognize that sometimes the stock price gets disjointed from also a reasonable valuation. And so companies put 10b-5 plans in place which we have one in place. So, we have the strength in the balance sheet that affords us the ability to keep investing into our facilities, our team, our technology, acquisitions as they arise with the right teams and also buy back some stock. So, we'll be looking at all of those.

Great. Thanks for taking my question.

Thank you.

And we have reached the end of the question-and-answer session. I will now turn the call back over to the management for closing remarks. End of Q&A:

Well thank you everybody for joining the call today. Both Mike and I are down here at the Fort Lauderdale boat show looking for a great show and -- but we'll be available if you have any other questions. Have a great day.

And this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.