Good morning, and welcome to the MarineMax, Inc. Fiscal 2023 First Quarter Conference Call. Today's call is being recorded. All participants have been placed in a listen-only mode. [Operator Instructions] We will have a question-and-answer session at the end of today’s prepared remarks. At this time, I would like to turn the call over to Scott Solomon of the company's Investor Relations firm Sharon Merrill. Please go ahead, sir.

Thank you, and good morning, everyone and thank you for joining us. Hosting today's call are Brett McGill, Chief Executive Officer and President of MarineMax; and Mike McLamb, the company's Chief Financial Officer. Brett will discuss the company's operating highlights. Mike will take you through the financial results. Brett will make some concluding comments and then management will be happy to take your questions. By now, you should have received a copy of the earnings release issued today. If not please e-mail our IR team at hzoinvestorrelations.com and a copy will be e-mailed to you. With that, I'll turn the call over to Mike McLamb. Mike?

Thank you, Scott. Good morning, everyone and thank you for joining this call. I'd like to start by reminding you that certain of our comments are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Any forward-looking statements speak only as of today. 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, global 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. Also on today's call, we will make comments referring to non-GAAP financial measures. We believe that the inclusion of these financial measures helps investors gain a meaningful understanding of the changes in the company's core operating results. These metrics can also help investors who wish to make comparisons between MarineMax and other companies on both a GAAP and a non-GAAP basis. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is available in today's earnings release. With that, let me turn the call over to Brett. Brett?

Thank you, Mike. Good morning, everyone, and thank you for joining this call. Let me begin by thanking the entire MarineMax team for driving record December quarter revenue and gross margins, while maintaining our commitment to customer service. Our team continues to deliver despite industry choppiness caused by a return to seasonality and by a more challenging economic environment. We executed well in the first quarter delivering revenue of nearly $508 million and gross margin of 36.8%, a significant increase over last year's December quarter record. The margins were certainly aided by IGY, but new boat margins and our higher-margin businesses generally demonstrated resiliency and contributed to the performance. This shows the success of our long-term growth strategy of adding high-quality higher-margin businesses to our portfolio. And to that point, it has been less than four months since our acquisition of IGY Marinas and the business is performing on plan. IGY has a great team and they do an exceptional job building long-standing relationships with their clients by consistently delivering a world-class customer experience. In December, IGY hosted the Caribbean Charter Yacht Show at our incredible Yacht Haven Grande property in St. Thomas. The event was met with an outstanding response from charter brokers and managers who attended the show and the turnout exceeded expectations. Plus the IGY team is currently in discussions with respect to several potential growth opportunities. IGY is the leading global brand for marinas and we will work to expand using this new growth platform. We are already starting to see strong synergy with Fraser Northrop & Johnson with the exclusive IGY Trident program. We are continuing the IGY integration and look forward to capitalizing on the best practices and resources to drive growth. It is clear from industry data and trends that the seasonal patterns…

Thank you, Brett, and good morning, again, everyone. I'd also like to start by thanking our team for producing a strong start to fiscal 2023. For the quarter, revenue grew to a new December quarter record of $508 million. The increase was largely due to the October acquisition of IGY, as well as revenue from both Intrepid and Cruisers Yachts, which are excluded from the same-store sales calculation. Same-store sales declined modestly by 1%. But due to a combination of a return to seasonality, as well as a more difficult economic environment, our units declined double digits. Our unit decline, while substantial, was less than that of the industry, indicating share gains. Our average unit selling price expanded significantly, mostly driven by a greater mix of larger more premium product. Most in the industry believe a lot of the unit decline is evidence of a return to seasonality. That appears to be supported by generally positive trends at Northern boat shows. I would add our same-store unit trend is about flat to our unit trend in the December quarter of 2019 with premium product generally showing growth. Gross profit dollars increased to $187 million, an increase to a new December quarter record of 36.8%, up 140 basis points. The growth was driven primarily by the acquisition of IGY, reflecting our strategy of adding higher-margin high-quality businesses to our portfolio. Absent IGY our margins were flat to last year's record, which is encouraging in this environment while also reinforcing our focus on the premium segment of the market. Total SG&A expenses rose about $20 million when removing the unusual costs in the quarter. Well over half of that increase was due to the acquisition of IGY and most of the remainder was likely due to our infrastructure being built greater sales…

Thank you, Mike. At MarineMax, our mission is clear to provide the world's best pleasure boating experience by consistently exceeding the greatest expectations of our customers, our team members and our shareholders. Across our organization, we continue to capitalize on the significant surge in people enjoying the boating lifestyle that has happened over the last few years. It's why we are so focused on service and why I am so proud of our team's performance at keeping our customers happy, which ultimately yields greater future business. This combined with our strategy focused on gross margin expansion will continue to yield significant cash flow growth. Recreational boating is a $57 billion industry in the US alone. And as a global company, MarineMax is just beginning to tap into the full potential of this fragmented market. We continue to execute on our strategic growth plan to drive sustainable value for stakeholders through a diversified business model built on premium brands, global marinas, world-class services and innovative technology. We are well positioned for 2023 and beyond. And with that, operator, please open up the line for questions.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of James Hardiman with Citi. Please proceed with your question.

Hey good morning. Thanks for taking my call. Good morning. So, I just want to get sort of an order of magnitude of the ASP benefit that you're getting here. I know Mike you said, units, I think you said were down double digits, but better than the industry, which I think was down I don't know 30% somewhere in there. Can we sort of narrow that range down a little bit? Just trying to get a feel -- it seems like there was a big ASP benefit in the quarter just trying to triangulate that?

Hey, thanks, James. Actually I think if you look at the segments that we primarily operate in the industry is probably down something like 35% or more in the December quarter. And if we're at a negative 1% same-store sales and I said that our unit growth was a heck of a lot better, if you assume we're maybe in the mid-20s in terms of units down, we had a very significant increase in average unit selling price in the quarter. It reflects really the migration to larger product more premium product, which is really the -- how MarineMax has changed over the years. That's kind of how our business model is these days.

Got it. And then you basically lowered guidance by about $1. We didn't actually have what your expectation was for the first quarter, but I'm just trying to figure out how I should think about how that $1 is distributed between what's already happened and how you're thinking about the rest of the year?

Yes. It's basically the miss if you will from last year deflated a little bit for the revised guidance that we had when this year started. Plus as I mentioned we had some elevated costs, although, seasonally they should align a little bit better. Plus we are expecting inventories to be higher this year just given how fast the supply chain is built back and then a little bit softer retail expectations. And then our tax rate changed from 25% to just in the low 26s has an impact also. So when you factor in those different variables along with the same-store sales decline that I mentioned in our prepared remarks versus flattish being down just a little bit has an impact on EPS. You should get right into our range that we gave in this year -- in this quarter's release.

Got it. And maybe a follow-up on the inventory piece. I think you said that versus 2019 you're down what 42% right, 58% of 2019 units?

Correct. On a same-store basis that excludes all the…

On a same-store basis.

Correct. Yes that excludes all the acquisitions. And dollar-wise we're probably down I don't know it's probably 30% or something like that due to inflation and a larger product and so forth. But units are down and dollars are down.

But what's the -- what is -- I'm assuming you're not looking to get back to 100%. It seems like most boat dealers are looking to get a little bit more leaner have more turns over the course of the year. What do you think target is for that number relative to 2019? And when do you think you'll get there?

Hey, James, we're talking -- this is Brett. We're talking to our manufacturers kind of every day, I would say, just to kind of try to keep them informed of what we're seeing with retail. And we still don't have a magic number other than we want it to be less than we've historically operated at. But we've got to kind of coordinate that with acquisitions and the growth. And candidly we have a lot of new brands in stores that we didn't carry in 2019. So that has to factor in as well.

It's a focus on really inventory turns more than just a dollar level. And I would say, as we've said on past calls all of our manufacturing partners and us and I think most in the industry have the same desire, which is to get to a healthier point. And the discussions that we're having are all very, very positive and very constructive with our manufacturing partners. And so we're all headed in the right place. It's -- obviously, it's a little tougher to get there, but we're all working on it together.

Sure. Is there a way to think about inventory turns versus 2019 then?

I think, it's premature now. I think, we'll keep working on the overall goal with our manufacturing partners and work to obviously improve our inventory turns.

Got it. Good stuff. Thanks guys and good luck.

Thank you, James.

Thank you. Our next question comes from the line of Fred Wightman with Wolfe Research. Please proceed with your question.

Hey, guys. Thanks for the question. I just wanted to sort of maybe put the current industry thoughts or outlook in the context with what you guys talked about last quarter. So I think if I remember you were talking about some softer back half trends in calendar 2022, but you didn't really expect 2023 to change a whole heck of a lot from there. Can you maybe just explain or expand upon what has sort of changed from an industry perspective today versus October?

Yes. I can make a comment and then Brett – I think our comments in October, we just let 2022 – the month of October registration data was not out yet. We had commented we were having a very good October, which we did. On that call we said, we expected the industry to be down, I think we said mid-single digit – low- to mid-single digits something like that. Looking at the data for October, November and December, the registration data and you got to recognize that there's inventory out there now for sure of pontoon product and some other product. And you're seeing the registration data, which to us was less than we were expecting. And others in the industry may have different opinions. But to us, it's less than we were expecting and it is difficult to break apart what seasonality and what's economic-related. But now we're one quarter into it. So we're just reflecting back that the industry overall is probably going to be further down than we had originally thought. And I think we're saying high single-digit now. So the big difference is just three months of registration data that we have now Fred.

But that was – I mean if I remember – just to be clear, it always gets a little confusing. You're talking about fiscal year comments, or are you talking about calendar year comments here?

Yes. It's a very good question and we get that from time to time. When we give industry comments, we're talking overall the industry during our fiscal year. So that'd be between October 1 through 9/30 is our commentary that we make.

Okay. Got you. And then just a clarification. I think your guidance was for a modest decline in same-store sales. Can you put some benchmarks around that? Is that low single digits mid-single digits?

Yes. No low single-digits.

Okay. Got it. Thank you.

Yes, thanks.

Thank you. Our next question comes from the line of Drew Crum with Stifel. Please proceed with your question.

Okay, thanks. Hey, guys. Good morning. So the gross margin in fiscal 1Q my sense is that was maybe a little bit better than you thought it would come in at. But the guidance for the year is unchanged. Can you talk about what your expectations are over the balance of fiscal 2023 and the puts and takes there? And then I have a follow-up.

Yes. I think that a little bit of conservatism in there just based on inventory build and some discounting out there, although we've held really – all the premium product seems to be holding up real well but probably just a little bit of that baked in. Mike?

Yes it's really not a change from our guidance. And our guidance in October, we did expect a little bit of margin pressure and boat margins to compress throughout 2023. You add to the business $100 million plus of marina revenue, which helps to offset that. But we still think mid-30s is great. We think we're going to be in the mid-30s but slightly down from where we were last year.

Got it. Okay. And then back in October guys, I think you provided some metrics on IGY, the $100 million plus of revenue, $40 million of EBITDA and a $0.10 contribution to EPS. Does that still hold, or are there any changes to that?

I think generally that – those numbers still hold for IGY. We obviously are working through all the purchase price accounting and all the implications there. You can actually see that when you work through our numbers, they had a very nice contribution to this quarter. When you look at the manufacturing segment, if you factor that, we had negative 1% same-store sales growth you can see that they had a nice revenue push in the December quarter, which is good to see, especially in the quarter that we merged, which obviously creates some distractions. But I think we'd still stick by what our thinking was around IGY.

Yes, okay. Got it. Thanks, guys.

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

Thanks. Hey, guys. Good morning. I guess first question on the financing environment. Are you starting to see more cash buyers come into the market? Are you seeing lenders pulling back at all, whether it be to consumers or on the floor plan side?

Yes. Joe, god morning. Yes, I'd say that our trends in the stores as far as closing deals, financing deals, all of that is holding up really well. The banks – we have a pretty resilient wealthy client we're lending to. So everything seems to be on track on par, I would say, wouldn't this? Agree Mike?

Yes. Actually the retail lenders love the marine retail paper. They always hold it. As I've said before there's never been a securitization of marine retail loans. They like it. The banks want it. I mean obviously rates have gone up. That's -- but in terms of how they underwrite, there's been really no changes. There's no increase in delinquencies or increases in losses. And on the wholesale floor plan side, I think the banks are finally glad. They got a little bit of inventory to get some interest on. So they're probably a little happier today than they were the last couple of years. But no, the relationship and the way they view the industry is very positive.

Okay. That's helpful. And maybe in terms of your same-store sales outlook this year, I guess you said down modestly. If you look at Q1, obviously, some weak unit numbers offset by much higher ASPs. Maybe help us understand how you're thinking about ASPs this year and when or if do you expect to see some level of promotional activity back in the market.

Yes. I'll comment. We generally see ASPs increasing every year. And I think this year will be no exception. We'll have an increase in ASP given the mix of our business, given cost increasing to a degree, although costs are definitely stabilizing and pretty reasonable on a go-forward basis. What was your second...

And I think on discounting I think some of the shows that we've seen, there's been some discounting out there. Again it depends on the products. Smaller, little cheaper product, maybe is under a little more pressure, because there's inventory, all that's well known out there. But so -- yes, I think there'll be some pressure on some models and products to give a little discounting, but the premium stuff is holding up very well.

And if I could squeeze one more in and I get this question a lot. Any anecdotal evidence that both usage is coming down? Are you still seeing people -- boat owners still using their boats pretty regularly?

Good question. Thanks for asking that. We watch it really close, right? We look at our marinas and we look at fuel sales, our getaways and events and attendance, and they're all sold out. People are boating here and there. You have a given weekend or something that's off compared to the other. But it's overall, I mean I'd tell you that's where we look. We look at website traffic to make sure people are out there looking on our website and it helps us understand seasonality a little, if they're still actively on our website. And then we look at activity in the marinas and boating and all of those are really good.

Got it. Thanks guys.

Thanks.

Thanks, Joe.

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

Hey, guys. Good morning. I think you had mentioned that the boat margins really haven't changed to a great degree, maybe a little bit of compression, but maybe if you could drill down into that a little more. Are you seeing any softness in pre-owned margins relative to new? Maybe give us a little more color there.

Yes, I'll comment. I commented that if you remove IGY from our business, our margins were basically flat to last year. And so that would tell you that new margins are holding up pretty well in the quarter and used margins. So, I don't think we're seeing a whole lot of change in used margins in our business.

Yeah.

No significant shift. I mean a little more inventory in both new and used, but we haven't seen any pattern or significant shift there.

And our used, as you know Mike, the trades were taken, right? Whether we took them -- we take trades last year and also this year. And the margin structure and the profile, tends to generally be the same. So...

Got you. Okay. And as it pertains to seasonality, I just wanted to touch on just the boat show calendar and maybe your presence. I think you've pulled out and/or downsized some of your activities around boat shows in the past couple of years. But I guess how does that give you more or less visibility in the seasonality, does it change anything? Maybe from a cost perspective, should that benefit certain quarters relative to others? I guess, how do we think about all that together?

Yes. Boat shows are -- we've really done a lot of work studying the boat shows all across the country, and there's a handful of shows that really perform well and give you that good index. And then there's other shows, that you go you spend a lot of money and you sell to the people that you've been working on working with for a year anyway. And I don't want to get too deep into that. But of course we get gauges of -- whether we're there or not we know how many people went through the turnstile. We know how many people attended our events at the store. So I would say, when we're kind of through the boat show season here coming out of March, we're in all the right places to understand all of those trends and capture all the sales to be add. And I don't know if that hits what you wanted to know but we have a good pulse on it.

Okay. And maybe if I could just slip one more in, I think Mike when you were giving kind of the puts and takes of guidance you said, one of the negatives will be having more, inventory which I presume would largely impact your flooring interest expense. But are there any additional carrying costs to think about as some of that inventory comes back?

Good question, Mike. I mean obviously interest expense is one that's very clear in the P&L. You do have -- you've got to maintain the inventory and costs. So you do have some additional costs that run through the financial statements that don't get line item out like interest expense to us. So there is some additional cost which is factored into our guidance already.

Okay. Great. Thank you.

Yeah.

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

Thank you. Good morning. Just a couple of follow-ups on some of the prior comments Brett and Mike, I guess, on inventory I think you made a comment that it's 58% on a same-store sales basis for 2019 and you're kind of talking to the OEMs about where you want to end up. Is the inventory level right now a good level for the guidance you've given for this year? Once again is it a healthy level? Are you concern that it may be too high, or is it more in line with kind of what you would need, or are you comfortable if that number actually goes up from here into your guidance given that you still are somewhat under where you were before?

Yeah. Actually that's a really good question. Our guidance assumes inventories do build seasonally, like they historically did from now into March and then, begin to drop in June. The question is to how much do they drop is a little unique this year, because we're still so lean on a lot of different boat and models, right.

Yeah, I was going to comment. I wish it was just flat line answer like that, but we have models that we won't even have any inventory of certain models and even of some brands where we won't have much inventory and then others where we have some. So it's still -- I would say in a couple of cases we have enough boats right now. And it'll build maybe a little. In a couple of cases we're way short.

Helpful. And then just a follow-up question, maybe the comment earlier that the higher-end customer the premium products kind of providing some insulation. But obviously there's not as many boats and any one [Ph] kind of that price point and the inventory is still a little lean there. Are you seeing anything that's showing some of that softness in demand that's kind of hitting the industry on the lower-end is creeping up at all in terms of the middle to higher-end buyer, or is that just tough to gauge, or one if you are -- if you're not or two is it something age because of the inventory situation?

Yeah. Eric that's a great question, it's actually what I'm trying to look at kind of in the last quarter. And it really -- yes, we saw it creep up into that kind of come up from where it was let's say three months ago. But I think it's really seasonally-related. Since we have stores all over the country you can kind of connect those dots. So it appears that I'll call it, softening in this last quarter in that a little higher segment than the low-end I think is seasonally-related, but we'll see, how these show go and how the spring comes together. : Got it. Thank you, Brett. Appreciate it.

Thanks, Eric.

Thank you. Our next question comes from the line of David MacGregor with Longbow Research. Please proceed with your question.

Yes. Good morning, everyone.

Hi, David.

Mike, you guys have been very active on M&A over the last few years. And I guess I'd like to get your thoughts in terms of how you're thinking about how much capacity you have, from a balance sheet standpoint for continuing to acquire?

Good question, David. I'll comment and if Brett wants to chime in he can too. But we're -- our balance sheet has always been a great resource and asset for us and it still is today. Our debt to EBITDA is less than 1 times. The company has flown strong cash. We are in discussions with various different organizations. Where we can find great companies, with great management teams that can help drive future earnings and cash flow and growth for the company, we're certainly still interested in those. And we believe we have the financial wherewithal to grow accordingly. So...

We continue to stay focused on -- as opportunities come in front of us obviously, a little more prioritization is going to be in play and some timing and things like that.

Just on that M&A topic, I mean the targets of your acquisitions lately have been somewhat diversed in terms of the nature of the businesses. And how do you think about priorities or white space or just where you need to go next in that endeavor?

Well, I think I'd say -- I'd speak to what we talked about in kind of our comments, IGY brings a whole new growth platform for us. And some of those include very low capital ways to grow, and some might require a lot more capital. We'll continue to look at our digital approach and the dealership business is still very important to us. And then of course, our growth with new brands and the brands that we've taken on over the last couple of years that candidly we're just getting started with brands like Aviara and whatnot are just really getting started.

And with New Wave Innovations, that seems to provide you with a little more scope. Where do you set the guardrails on that in terms of where you're willing to go where you're maybe hitting limits strategically?

Yes. I think we've been very strategic about the companies that we have there Boatyard and Boatzon and kind of do they fill a very front-to-back experience for the customer. So that's where we're focused. I wouldn't say, we're going to get wildly out of that scope. I think those two tools have some really good opportunities in the future here for us. I'd say, we'll stay focused there because that's a front-to-back solution for the consumer to -- and that's our goal to create a better experience for the customer.

Right. Right. Okay. Thanks very much. Good luck.

Thank you, David.

Thank you. Our next question is a follow-up from the line of Fred Wightman with Wolfe Research. Please proceed with your question.

Hi, guys. I just have a quick clarification on the EPS guidance. All of the add-backs that you're providing in the non-GAAP EPS number, were those all contemplated in the $7.90 to $8.40 that you gave last quarter? I know that you had given us some hurricane impact reconciliation for fiscal 2022, but I just want to make sure that it's sort of apples-to-apples the updated non-GAAP guidance versus what you guys had given previously.

That's good question, Fred. Yes, it's all contemplated. It's apples-to-apples.

All right. Great. Thanks so much.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. McGill, for any final comments.

Well, thank you everybody for joining the call this morning. We're excited kicking off some boat show -- boat show season coming up with the Miami Boat Show here in a few weeks, kind of then falling into Palm Beach and many others around the country. Hope to see you out there and look forward to talking to you on our next call.

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