Good morning. and welcome to the MarineMax, Inc. Fiscal 2023 Second Quarter Conference Call. Today’s conference call is being recorded. [Operator Instructions] 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. 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 hboinvestorrelations.com and a copy will be e-mailed to you. With that, I will turn the call over to Mike McLamb.

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 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.

Thank you, Mike. Good morning, everyone, and thank you for joining us. Let me begin by thanking our exceptional team more than 3,900 strong around the globe. We are consistently delivering on our mission to provide customers with the world’s best pleasure boating experience. While the industry buying cycle is looking different than it was over the past couple of years, what’s abundantly clear is that the passion for being on the water has never been stronger than it is today. A little more on this later. Turning to our results. This morning, we reported second quarter revenue of $570 million. This was the second best March quarter top line in our history surpassed only by the record $610 million achieved in last year’s fiscal second quarter. After the exceptionally strong results we saw in fiscal 2022, our revenue performance this past quarter reflects the boating industry’s return to seasonality amid growing macroeconomic uncertainty, fueled in part by the crisis that hit the U.S. banking sector last month. Traditionally, March is the strongest month of the second quarter, often as big as January and February combined. This year, however, despite March being a good month with positive same-store sales growth it was weaker than what was projected, leading to a larger decrease in same-store sales for the quarter. Same-store sales increases of 7% and 45% in the prior two March quarters contributed to an especially challenging comp this year. Based on our performance to-date and with the level of macroeconomic uncertainty worsening as the second quarter progressed, we are bringing down our adjusted earnings and adjusted EBITDA guidance for the full year. Mike will address our fiscal 2023 outlook in more detail in his remarks. Although our second quarter performance was not what we had anticipated, it’s important to keep…

Thank you, Brett, and good morning again, everyone. I’d also like to thank our team for their continued hard work during the quarter. For the quarter, revenue declined about 7% to $570 million, largely due to a 13% decrease in same-store sales, partially offset by the addition of IGY, which we acquired October 1. As Brett noted, the decrease in same-store sales reflected the boating industry’s return to seasonality amid what continues to be an uncertain economic climate, which contributed to a double-digit decline in units in the quarter. While units were lower across most categories, our premium brands continue to meaningfully outperform the value segment of the market. Geographically, our locations in Florida and other coastal areas have performed ahead of those in the Midwest and other interior regions of the country, which tend to be more seasonal. Average unit selling price continues to grow with the relative strength in premium versus value and the migration to larger product. It’s worth noting that same-store sales were down in January improved in February and they were positive in March. Gross profit dollars were down modestly to $201 million, while gross margin grew about 150 basis points to 35.2%, a new March quarter record. The increase was primarily driven by the acquisition of IGY as well as strong performance in many of our higher-margin businesses. Excluding IGI, gross margin in the second quarter was down slightly compared with the prior year, which does indicate that product margins, while down modestly were relatively healthy. To provide more context on the performance of our higher-margin businesses, beginning with our second quarter 10-Q, we are taking a step to increase disclosures around our marina related business as well as our higher-margin businesses in general. We will add tables that show the percentage of revenue…

Thanks, Mike. We look ahead with enthusiasm as we advance into the second half of fiscal 2023 and beyond. Strategic acquisitions such as IGY, give our business model the resilience and diversification to address the opportunities and challenges of any economic cycle. New technology offerings such as Boatzon and Boatyard are key differentiators that will help provide us with a competitive advantage and continue to grow market share. We are aligned with the best partners across our retail location and are well positioned to achieve profitable growth over the long term. At MarineMax, the customer experiences at the center of everything we do. Our world-class Net Promoter scores, which measure a customer’s likelihood to recommend our products and services speaks both to the exceptional level of service our team delivers and to the strength of our customer relationship. And with that, operator, please open up the line for questions.

[Operator Instructions] And our first question comes from Joe Altobello with Raymond James.

Thanks guys. Good morning. A couple of questions on the comp. I guess, first, you mentioned obviously units down pretty significantly. Was the pricing or average pricing up in the quarter?

Yes, it was up high single digit in the quarter, and I think close to double digit year-to-date. But yes, reflecting the trend of premium and also the larger product, Joe.

Okay. And I want to kind of go back to your comment, Mike, about your comp trends throughout the quarter because -- I am not sure if I heard you correctly, but it sounds like -- you did say March was up, but help us understand what happened in Jan and Feb leading into March.

Yes. So thanks, Joe. So back when we did the quarterly call in January, we did say that January was expected to be down. So we expect it to be down -- we had expectations for February, which were great, not -- excuse me, which were fine. They weren’t great. But then our expectations for March at the beginning of all this were even stronger than it ended up being. But you heard me right, March had positive comps. We just expected margin to be even stronger than it turned out to be.

Okay. So March comp positive. April is going to be down modestly, it sounds like, but it seems like it didn’t reflect as much as you would have hoped.

That’s right. We expect that March -- March is normally as big as January and February combined. You have heard us say that before. And March was a good month in the whole scheme of things, better than last year, not quite equal to January and February combined. And we kind of felt that softness as we talked about as the month went on.

Okay. And one last one. In terms of your guide, it looks like you are assuming trends kind of stay pretty consistent in the back half versus the first half in types of comps.

That’s correct. And if you think about the next two quarters, the June quarter, in theory, has an easier comp because it was negative last year in September would be tougher because it was positive last year.

Okay. Thank you.

Thanks Joe.

Our next question comes from Fred Wightman with Wolfe Research.

Hi, guys. I just wanted to follow up on the March commentary again. I think, Brett, in your prepared remarks, you made a comment about the banking impact in March specifically. Is that something that you saw impact either financing availability or approval rates or consumer skittishness, like was that something that impacted you guys specifically?

Yes, Fred, how are you doing. Yes. In fact, I think March started off really strong and it just felt like it pause. I’d kind of go with your last comment about skittishness a little bit. It just kind of slowed down, created pause in the consumer towards that second half of March. Mike?

Yes. No, just on your comments around financing, though, Fred, we haven’t felt any structural fallout or any changes in how banks approach retail financing in terms of the creditworthiness, things of that nature. Obviously, rates are higher, although they haven’t really raised a whole lot in a little while, but the rates are higher, but no real fallout from the banking crisis with the folks who buy the retail paper.

Okay. That’s fair. And then on the industry outlook, I think you guys said that you are expecting that to be down double digit now. I mean that’s a really wide range, right, the double digit. So do you sort of think it’s going to be better, were sort of similar to the down 20%? I guess that’s kind of a calendar number, but do you think things are going to get better or worse or stay the same from here?

Yes. So it’s really interesting. I know you know the industry real well. When you look at the month-over-month comparisons, we go into kind of a little tougher comparisons in the summertime and then easier comparisons right near the end of our fourth quarter. So I think months are going to vary based on what they are going up against last year. If I remember right, April is probably the toughest month between now through July. And then the industry months get easier. But we think overall, so I think if you listen to what we are saying, if the industry is down 20%, 25% now, we are saying double digit, probably overall, it’s going to get better than down 20% to 25%, but it’s still going to be down double-digit negatives.

Helpful. Thank you, guys.

Our next question comes from Drew Crum with Stifel.

Okay. Thanks. Hi, guys. Good morning. I know it’s still early in the season, but are you seeing any change in usage behavior? And would you anticipate specifically lower fuel costs relative to where they were a year ago, driving any parts of your business tied to usage.

I think that’s one thing we look at, Drew, is what’s -- everything from fuel sales at our marinas, people out on the water, service trends and our getaway events that we have customers going on. They are still all sold out. We just had a big Galleon event that we have customers in Key West. So they are boating. And I’d say as active as ever, maybe not the frenzied weekends of the COVID weekends, but they are out there boating.

Got it. Okay. And then you touched on the record gross margin for fiscal 2Q and address some of the puts and takes on that line. I think you are suggesting mid-30s range for the balance or for all of fiscal ‘23. Any callouts or anything to note in the second half of fiscal ‘23 that would move that line.

I will comment, and Brett can chime in if he wants to. We are expecting increased margin pressure on products that we sell themselves just as inventory builds a little bit in the industry. We don’t think it’s going to be real significant. We think margins will do -- will still remain healthy. For MarineMax in particular, with the addition of IGY this year, which we did not have in the June or the September quarter, that’s going to -- we believe it’s going to offset all of that and our full year margin should be in the mid-30s. Our other businesses that we talk a lot about are higher-margin businesses, finance and insurance, service, our marina business that we have, not just IGY, but here in the States, all those businesses are doing well themselves and are helping also. And as those businesses thrive, especially in maybe a tempered same-store sales environment, it does help to support margins even greater, as you can imagine.

All right. Okay. Thanks guys.

Thanks Drew.

Our next question comes from James Hartman with Citigroup.

Hi, this is Sean Wagner on for James. I am wondering if you could give us maybe just trying to figure out the split between ASPs and units in that March growth and then the, I guess, modest decline expected for April and even the high single-digit decline for the full year. How do ASPs and units compare in those numbers? Is the ASP growth similar? And then the units is what’s driving the March growth? Or I guess, how should we...

Yes. ASPs in the quarter I think I commented we are up high single digits, which would tell you our units were down something like 20% across the board. But yes, in our forecast, we are expecting also ASPs to continue to be up probably in the mid- to high single-digit range with -- and how that’s what reconciles to our unit commentary for the for the industry for the year.

Okay. And so in March, the growth was driven by units and the same for the April decline.

So in March, the same-store sales decline -- oh, you mean in the month of March. If you were asking specifically for the month of March, I actually don’t have the -- our AUP for the month of March, but I would tell you, it would be up for our same-store sales growth.

Okay. I guess do you know if units were down in March or up in March or up in March?.

I am going to tell you, units were down in March as they were for the industry, but our -- we had several brands that did well in the month of March, meaning they were up themselves year-over-year.

Okay. And piggybacking off of that, are you seeing any differences in demand as far as like low end or high end product or income related differences among consumers or anything like that?

You know one thing we have been consisting on is our, we skew towards a very premium and with our average unit selling price being close to $300,000. And so the premium product continues to do better in the industry than the value product. And we see that within our own business as well.

I would add kind of the macroeconomic pressures seemed, have kind of moved up in that price scale more so then let’s say six months ago when we started talking about, smaller cheaper boats being under pressure because of interest grades. It’s creeping. The pressures are creeping up. Creating pause with consumers, they have taken longer to make decisions, I would say, you could even call that they are getting back to kind of the older buying cycle. They are coming into the funnel earlier, they are excited about going boating, they either already have a boat, they are looking for a boat, and they are actively shopping. But the last two years, there was no active shopping, there was people walked in and they bought. So the buying is there.

Okay. Thank you very much.

Thanks Sean.

Our next question comes from Eric Wold with B. Riley Securities.

Thanks. A couple of follow-up questions. I guess a follow-up on the gross margin comments and questions. I know you talked about having the higher-margin businesses offset some of the pressures you may be seeing on product sales as inventory comes back, maybe take that a complete step further and talk about if you took margins on new and used boat sales completely back to ‘19 levels, even a little bit more if it worsens, what does that look like right now with what you see with IGY and everything else in terms of a pro forma gross margin if you assume it got a lot worse.

It’s a good question, Eric. I actually have not done that exact math. What I have said on some of these calls is that the product margin benefit has been something like 1/3 of the overall improvement of margins. prior to adding IGY. So if you look at 2022 versus 2019, I think we are up roughly 1,000 points or thereabouts. So call it, $300 million to $330 million or something would be due to product margins. IGY would offset a lot of that if it actually fell all the way back to 2019 levels, which we don’t think that’s going to happen. But I don’t have the exact math for you, but it’s a good question.

Healthy inventory, good models and stock all help with that pressure as well.

We don’t -- the way the industry is trying to handle inventory. And I know we have talked a lot about rising inventory, but all of the manufacturing partners that we work with and ourselves are all really trying to keep inventories at a healthier long-term level with higher turns -- exactly where that lands will be determined. But sorry, I don’t have the exact answer, but I would offset a lot of it.

That’s helpful, Mike. And just safe to assume that maybe not an exact number, but you feel confident going to keep margins above 30% and kind of the low 30s even to return back on product.

Yes. That’s our objective, obviously. And adding companies like IGY really helps that and continuing to work on a higher-margin businesses, just to force that even further.

Got it. And then on the inventory, you said you are still light on a same-store sales basis. Maybe kind of talk about what areas are you light on heading into the selling season and kind of at risk or you have got kind of other products that could be replacements from buyers coming in?

We are the latest on larger product and larger center console type product, which is generally consistent in the industry also is where we are like.

Yes. But I think going into the season, we don’t -- we have got a lot of great models to sell. So it shouldn’t put pressure on the ability of somebody’s ready to purchase a boat, we should have the right selection of products or it’s coming soon right? Yes.

Got it. And then just final question, if I may. I know there’s been some increasing discussions around your real estate portfolio and kind of underappreciated that may be. And I know you guys have taken some actions to take mortgages at least take some capital out of that over the past couple of years. I know it may be difficult to comment, but any thoughts on if there is additional thoughts on possibly looking around that real estate and what the board looking to do something to maybe realize that value or least make it that you realized out there?

We have a great portfolio of real estate that is so highly strategic to our operations and very valuable to the revenue streams and the growth of those revenue streams. So we are - we like the properties. We are looking to leverage them as far as getting more revenue streams coming through those, but nothing actively going on there.

It’s a question that comes up as cycles occur like this cycle. And often, it’s a defensive type. And I am not suggesting you are asking this, but is often sometimes defensive about what if liquidity gets tight or something like that in the company’s cash and liquidity position is very strong right now. And our ability, if we ever need to leverage the real estate to use the cash for strategic reasons acquisitions, whatever we need still exists like we have done historically.

Helpful. Thanks. Appreciate it.

Thank you, Eric.

Our next question comes from John Healy with Northcoast Research.

Thank you. Just wanted to ask a big picture question. Obviously, this business is continuing to evolve and many different ways. So I’d love to hear your thoughts just about the new disclosure and how we could think about maybe, I don’t know, I want to call it a recurring revenue or recurring EBITDA level of the business just associated with maybe the parts and service and the Marina business. Is there any way to think about that number that you guys have maybe come up with that’s maybe a percentage of revenue or percentage of EBITDA, which is kind of not tied to retail in any given year.

So it’s a very good question, John. And I did comment that we are beginning to increase disclosures around the different businesses that we are in and the higher-margin businesses specific to Marinas. The 10-Q is supposed to be filed today. It will get filed today. And there will be some new tables in there, which will begin to shed light on how much revenue is coming from our Marina properties, both international and here in the states. So that’s the $126 million I mentioned in the first six months of the year, which is obviously considered stickier. We haven’t gotten to an EBITDA calculation yet on the property. It’s something that we are still exploring and it’s really the -- just how integrated a lot of our marinas are with our with our retail operations and how we got to break apart the P&Ls to get an EBITDA down to that level. We will start with revenue. And there are a number of, obviously, REITs that now own marinas that investors can look at to get an idea of what typically flows from a marina. So you could look at some of that data and apply it to our revenue to try to come up with some ideas of what the EBITDA may be. That’s one thought process that has been suggested to us. Absent us providing our own EBITDA number, which is going to take us a little bit of time to kind of work through that on our end. But it’s a good question. It’s something that we are working towards.

Okay. And just one follow-up question, 1 housekeeping question. You mentioned the REIT structure or the REIT comparable. Is that ever something that you guys have kind of spent time evaluating if you could structure an operating company and a property company and does it maybe make sense to think about that? And then secondly, the gain on the equity investment in the quarter, where did you guys have that kind of net against? Is it in SG&A or COGS?

I will start with the second one. It’s in SG&A. It’s netted down in SG&A. And I can...

Yes. As far as REIT structures, we just closed on the acquisition, IGY, getting to know the team, the platform that is an amazing platform with some revenue streams in addition to just renting boat slips. And we are just trying to maximize all that and get our arms around it and find ways to grow that platform or there are already ways to grow. We are just trying to maximize that. That’s our main focus right now.

Understood. Thanks guys.

Thank you, John.

Our next question comes from Brandon Rollé with D.A. Davidson. Brandon Rollé: Good morning. Thank you for taking my questions. First, just on what you are seeing in the market right now. It seems to be a little more cautious than one of your major suppliers that reported this morning, they indicated you are seeing a resilient consumer and not seeing a slowdown. Do you feel like you guys are underperforming the broader market? Or what would change their view on the market versus yours? Thanks.

I could comment and Brett can chime in. I apologize. I am my chuckle was only -- and we have been doing this -- this company has been around public for 25 years. And in 25 years, we have outperformed the industry every single quarter. There are certainly times every now and again, where there’s data disconnects between us and some of our partners over time, the data always converges. And so I suspect that both companies are right. I think that’s probably possible based on the data they are seeing. And I think over time, there will be a convergence of the data for both organizations, too. Brandon Rollé: Okay. Great. And then just a quick question on the used market. I guess, what are you seeing there in terms of used inventory availability and also maybe the used versus new pricing spread now that inventories have normalized on the new side?

Yes, the used boat market is still strong, and we are getting inventory on used boats in stock now, a little bit more inventory available for the customer. But nothing dramatic used products holding strong. Obviously, from a year or two ago, the pricing has kind of made some adjustments more normalized, but nothing that’s not the ordinary used is healthy and new is healthy, just a different backdrop out there right now. Brandon Rollé: Okay. Great. Thank you.

Our next question comes from David MacGregor with Longbow Research.

Hi, good morning. This is Joe Nolan on for David. I just had one quick one for you. Just kind of on promotional environment. Just wondering what you are seeing in terms of promotions in the quarter and how you see that evolving through the year?

There’s been commentary out there on boat shows. It was higher than the last few years, there’s more promotional activity on product, and we are seeing it, and we are working with our manufacturers to create promotions to move inventory, but nothing is out of the -- nothing is extreme right now. That seems to be kind of the appropriate level of promotion to get consumers to kind of create a little bit of urgency, but not hurt the credibility of the pricing of the product.

Got it. And just a follow-up on that. How would you compare it to pre-pandemic levels at this point?

The promotional level is -- yes, it’s meaningfully lower than pre-pandemic level.

Okay. Got it. Thanks. That’s all I got.

There are no further questions at this time. I would like to turn the floor back over to Mr. McGill for closing comments. Please go ahead.

Well, thank you for joining the call today, and thank you for all the great questions, and we will look forward to updating you on our next report. Have a good day.

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