Good morning, and welcome to the MarineMax, Inc. Fiscal 2023 Third Quarter Conference Call. Today's call is being recorded. [Operator Instructions]. At this time, I would like to turn the call over to Mr. 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 that was 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'll turn the call over to 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 help 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, and good morning, everyone, and thank you for joining us. As always, I'd like to begin by thanking our teams around the world whose great efforts contributed to a strong third quarter driven by revenue of more than $720 million, a new quarterly record for MarineMax. Across all our locations, including our 59 marinas around the world, the MarineMax team consistently embodies our mission of delivering the world's best pleasure boating experience. The secret to our success is staying close to our customers. The relationships and customer service reputation that we've built over the past 25 years have been central to our strong operational and financial performance. To that point, while I am proud of our financial accomplishments, I'm most proud of our team's ability to continually raise the bar in keeping our customers happy, as evidenced by our outstanding Net Promoter Score. This morning, I'd like to begin with 3 key takeaways from our Q3 performance. First, we are delivering on our strategy to structurally enhance MarineMax's margin profile through acquisitions and expansion into higher-margin business. Second, in the short time we've owned IGY Marinas, it has already begun to demonstrate its potential as a growth platform and is well positioned to drive growth. And third, while factors such as seasonality and economic conditions may affect our results from quarter-to-quarter, we are upgrading MarineMax with a long-term lens. And from that perspective, we are highly confident both in our strong market position and the global trends that are fueling the world's passion for the boating lifestyle. Turning to the specifics of the quarter through strategic moves in marketing and other customer-centric activities, we began to drive higher sales in May and June. These were not only the 2 biggest revenue months in the quarter, but the…

Thank you, Brett. I also want to thank our team for producing another record quarter with over $720 million in revenue. To put things in perspective, it was not that long ago when our annual revenue was around $1 billion. The demand for the boating lifestyle is clearly alive and well. While the quarter opened with the down April, as we noted on our March quarter earnings call, the strategic moves Brett mentioned helped accelerate business in May and June, which ended up being the 2 strongest revenue months in our history. Revenue in the quarter grew about 5%, primarily reflecting the addition of IGY, growth in both cruiser yachts and Intrepid power boats as well as a modest increase in same-store sales and other recent acquisitions. Geographically, markets like the Midwest performed well, which supports the seasonal commentary. Not surprisingly, Florida was a bright spot, a trend we expect to continue for the foreseeable future. Our unit volume was down low double digits given the softness in April and continued industry sluggishness in pontoon and tow boat sales. But in May and June, many of our premium brands showed growth. Given our premium focus, our average unit selling price continues to rise. Gross profit increased to $244 million on the strength of strong revenue, combined with a healthy gross margin of 33.8%. As we indicated on our last call, we anticipated and planned for a modest decline in boat margins, partially offset by the addition of IGY. SG&A expenses increased to over $169 million primarily due to the addition of IGY as well as other businesses we have acquired, combined with the inflationary environment. Like other companies, we continue to look for ways to be more efficient and reduce costs where possible while not impacting our ability to provide…

Thanks, Mike. We entered the final quarter of fiscal 2023 with positive momentum despite the more pronounced seasonality across the recreational marine industry, the fundamentals of our business remain strong. At more than $230 billion, the annual economic impact of the recreational voting industry in the U.S. has never been more robust. And based on our interactions with customers and partners across the globe, the enjoyment and freedom of being out on the water is booming. Our higher-margin businesses provide a diversified income stream that over time, reduces exposure to the industry seasonality. Just as important, assets like IGY put us on a competitive global footing to generate sustained long-term growth. And with that, operator, please open up the line for questions.

[Operator Instructions]. Our first question is from James Hardiman from Citi.

Could you just give us a specific same-store sales number? I think you said it was in -- can you be a little bit more specific there? And then maybe break out the AUP, is this unique number that would be really helpful.

Yes. Thanks, James. Yes, it's up, but it doesn't even round to 1%. So it's above 0. So it's nice to have a little bit of growth, especially with April being down like it was. And we did say our units were down in the low double digits. So they have positive same-store sales, you're going to have an AUP growth of double digits, if you will, to get that. So hope you -- clarity. Yes, the units, I think we said we're -- pontoons in some other ones, which were sluggish in the quarter.

Okay. Helpful. I wasn't sure if that's low double digits with the quarter to say it sounds like it was the full quarter. Okay. And then as you think about same-store sales I think you guys were previously assuming down high single digits. And I think what you said is now a mid-single-digit number, even though industry function is still the same. How should I take that? Is that sort of a commentary on better ASPs sort of driving the revised guidance, what's the bridge there?

It's really how we performed for the first 9 months of the year now with the June quarter being modestly stronger, stronger than we had anticipated when you look at the rest of the year and bake in the industry assumptions, you get to a down mid-single-digit range versus high. So it's just fine-tuning the comment that we made at the end of the March quarter.

Okay. And so if I think about that mid-single-digit decline, units are expected to be down something still meaningfully more than that. I think you're saying you still expect ASP to be pretty meaningfully for the year. Obviously, and that's obviously been the case in the first 3 quarters.

Yes, ASP will continue to be up. And our -- the units that we probably confused people a little bit because we always talk about what the industry is supposed to do in the industry in our fiscal year is going to be down in the double-digit units, we believe, and that our same-store sales growth for the year is going to be mid-single digits. So well, we won't be down quite as far as the industry from a unit perspective, we will continue to have growth in our average unit selling price because of our premium focus on the migration of the larger product.

Got it. And then lastly, to the July commentary, it sounds like you expect it to be up on a same-store sales basis. Can we say the same? Were units actually up into July? Or was that primarily a pricing method?

You know what, the much is not over, so I can't really comment specifically on units or AUP, but just right now, it is forecasted to be up over the prior year.

Our next question is from [indiscernible] with Stifel.

Mike, can you comment on how you're looking at the inventory build across your stores over the next few quarters? And if there's any deviation from the historical trend line? And then maybe, Brett, you mentioned the partnership between IGY and NEOM. Beyond plans for a destination at Sindal what does the pipeline for new marinas look like? Just trying to get a sense as to what the opportunity set is here for the longer term

I can -- thank you, Drew. On the inventory question, it's a good one, especially because the industry is kind of trying to find the right level of inventory. And from a unit perspective, on the premium end, there's still, I think I said we're 35% down year-over-year. So probably the one quarter that had an unusual trend would be the quarter we just finished, where inventories grew modestly in the June quarter. Typically, they fall in the June quarter if we're back to -- if you go back to a couple of years ago, but inventories traditionally either fall a little bit or maybe are flat at the end of September. I actually think inventories will modestly build at the end of September, again, given where we are from a unit perspective that when you get to December, assuming more seasonality in the industry, inventories always build and they build all the way into the end of March. And it all depends on the strength of the March quarter as might stay build because sometimes the March quarter can be pretty significant from a retailing perspective, and inventories actually begin to taper off then they drop a lot in the June quarter. So if we assume more seasonal patterns next year, I would assume inventories will build from now through December and maybe through March and then fall quite a bit in the June quarter.

Yes. Andrew, I'll comment. Thanks for the question about IGY and the growth there. Yes. We view it as a growth platform. That's part of why we did it. We also looked at it with the network effect of like you've recognized there adding Sandalas and Marina in the future here. Another destination point for our superyachts, pretty, pretty exciting. But as it relates to the growth platform, a lot of opportunities out there. It's an active pipeline of varying destinations and marinas clearly, the cost of capital right now and the things that are going on in the world do have an effect on that, but we're trying to be opportunistic and continue to look.

Our next question is from Joe Altobello with Raymond James.

I guess, sort of a big picture question, maybe a little bit more color on what's driving the improved retail trends over the past couple of months, both for yourselves and the industry. It doesn't seem like the macro backdrop has gotten much better. Is this just more normal seasonality? Or is there something else that's helping to drive that?

Yes, Joe, I think clearly, I think when you really go back to when we -- after Q1, I think we said things like there's some seasonality and some softness. We can't tell how much of each we -- just this past quarter, we struggled kind of getting retail in the March quarter that is. We applied a lot more programs, work with our manufacturers, some more discounting, et cetera, promotional activity, and we move the needle. Not all of it was natural, meaning the demand is good out there, but it's requiring more promotional activity. So it was exciting to see that our team put the plans together and really work on it along with seasonality, right? It's the boating season in the northern markets and so on. So -- but you're right, there's still headwinds out there. Interest rates, the cost to get a boat loan is putting pressure. And that -- it's not just in the small boats as we reported a year ago. So it's required a little more effort to get the sales to come across the -- for a lot more effort to get the sales to come across the board.

Got it. Okay. And then I guess on that point, in terms of pricing, there's been a lot of discussion about affordability in this industry and others as well. How do we think about pricing for model year '24? I guess, on a gross basis, and maybe net emotions.

When you say pricing, do you mean like the inflation-based pricing and lectures?

Yes. Yes.

I'd say the industry is very close to what it historically saw from an inflationary-based environment for model year 2024 low single-digit increases with very few exceptions, is what we're hearing from most manufacturers which is nice relative to the last couple of years.

We're definitely working with all our manufacturers to try to find a way to kind of slow down the growth of the inflation on the newer models. They're doing what they can but it's clearly a concern for the industry that we're working on.

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

Two questions. I guess one, you talked about some of the weakness in the quarter recently around specific boating categories, you called out pontoon and towboat. that mainly driven by the price point of those categories and kind of the income demographic the target? Or is there something else you've been going on within those segments?

Yes. I think as far as the categories go, I think a year ago, across all categories of the more, I'll call it, entry level, the lower-priced boats started feeling pressure quicker because of payments, insurance and things like that, a quicker effect on that buyer. But when you look at some of the other segments that are down, it's not just that lower end -- when you say pontoon tech, a lot of the product we sell is 100,000 pontoon boat. So it's an expensive pontoon. So it's somewhat segment related versus just entry level or lower priced both.

Yes, it does. That's right. And then on the margin, I know you talked a little bit about recently. Do you just give us a better sense of the gross margin delta this quarter versus last year's quarter for just the new and used boat sales? I know you kind of talked about doing some new things in marketing and promotions to try to drive sales and kind of the seasonally stronger period. Are you at a point where whatever margins are right now for those new news boats? Where you think it's sustainable to kind of incorporate everything you're seeing to a more normalized environment or there is room for those to decline further from there?

I can comment. I mean new and used margins are historically still high. They are down as we expected from a year ago period, but they're still pretty strong. On our consolidated margins, obviously, we have IGY coming in there this year, which is -- if you do the math on IGY, you'll see it's contributing something north of 100 basis points of the change year-over-year. But you also have last year where you had a quarter where you had negative same-store sales growth, which meant all the other higher-margin businesses grew as a percentage. And this year, we were not negative sales have grown, which the higher-margin businesses shrink just a little bit. But the -- as to the pricing and the margins going all the way through 2024, we haven't really sat down and developed our guidance for 2024. I would expect probably some level of product margin moderation going through 2024 as inventories continue to build, Brett, what's your...

Yes. No, I think also trying to get back to this thinking through seasonality, right? Right now, we apply promotions during a hot seasonal market, no pun on the heat out there, but -- and we move the needle. But as we go into, call it, the off season, what is it going to do to drive some sales? What do we need to do there on some new products? We'll just have to see how that plays out here this fall.

Our next question is from Fred Wightman with Wolfe Research.

Just on the implied fourth quarter guidance, it seems like a pretty big range. Wondering why you feel like such a wide range is appropriate and maybe what the biggest swing factors would be to get to the high end versus the low end?

I'll just start quick. I mean some of it we've just come off a few years of having massive backlogs, which never were the case in the industry. So every quarter, you're kind of creating new business. So some of it today or Mike, go ahead.

I just -- we obviously had 2 quarters where we've adjusted down guidance, and there's still a lot of uncertainty out there, and we think the range is prudent given that uncertainty. Given the -- what makes it difficult is how much of it is a return to seasonality, how much of it is macroeconomic events. So we just felt it was prudent to leave the range wide like that for the -- for Q4, Fred.

Okay. That's fair. And if you think about some of the promo activity that you've touched on a few different times, are you seeing competitors and other dealers across the industry sort of match and mirror that? And then when you look at just the level of channel inventory from peers in the overall industry, are you worried about that, just sort of where we are in the season? Or do you think everybody is sort of picking up promos and will clear through the inventory as we move into the off season?

Well, I think I'm worried isn't the right word, concern watching, keeping an eye on things, making sure we stay on our game as the competitors do, inventories will probably continue to build through the industry, which could create some pressure there. It depends on how the manufacturers that each of us deal with. But we're watching the competitive pressures because that will have an effect for sure.

Our next question is from Michael Swartz with Truist Securities.

This is Lucas on for Mike. I was just wondering if you could talk about your plans to market and invest in boat shows in the year ahead. Anything changing from previous years?

Yes. Good question. It's been a wild ride with boat shows, right? Pre-pandemic and then you go into the pandemic with almost no shows in some cases. And then except for reasons that you couldn't attend. And then when shows started coming back, we've been very careful which ones we've attended. We're going to still make a disciplined approach but with inventories and competitive pressures, there's probably going to be more shows, which will require additional attendance cost, et cetera. So it just -- we're measuring it and being careful, but I would say we're going to return to probably more shows even last year, but carefully, maybe not back to historical levels, but we'll see how that plays out.

Our next question is from Brandon Rolle with DA Davidson. Brandon Rollé: Congratulations on the strong quarter. I just had a quick question on the used market right now. Could you talk about what you're seeing in terms of used inventory availability and pricing within the market? And then I had a quick follow-up as well.

Our real visibility to use is obviously the trades we take. And late model trades continue to be highly sought after pricing on them and our margins on them are pretty darn good. Our view, the industry overall is kind of similar that there doesn't seem to be any real big issues out there on used product. It's late models are always highly sought after really from an industry perspective. And keep in mind, ours are just the trades were taken. Brandon Rollé: Okay. Okay. Great. And then just on the promotional activity. Could you talk about what you're seeing in terms of OEM promotional support versus maybe incremental promotional support you're providing to maybe help retail?

Yes. Great question, Brandon. I think that was kind of the magic in the quarter for us as we got with all of our manufacturers market by market, what's needed, how can they help, how can we help partnering together to achieve every manufacturer and saying, what do we need to do to selectively market promote and maybe discount, obviously, the right models to move through. So that was a good partnership shared costs, so to speak, and that seemed to work.

Our next question is from John Healy with Northcoast Research.

Just kind of wanted to ask kind of a question outside of the operations of the business. I think it was in late May, there was a 13D filed, and I know there hasn't been a ton of disclosure on the topic, but to the degree you can, I understand there's probably elements of confidentiality if I think of. But like can you help us think about kind of maybe the dialogue there, openness to either reviewing kind of capital structure or M&A strategy? Or maybe what some of the topics might be there that you guys are kind of thinking through and how we might kind of think about getting updates on kind of that dialogue?

Yes. I'll make a comment. The -- obviously, you can read the 13D filing. Our conversations and discussions with that investor are really core drill no different than conversations and discussions we have with any other investor. So other than the filing, there's really no difference in the interaction with them and their questions than what we have with everybody else.

Okay. I appreciate that. And I just wanted to ask just any way you could give us some color just in terms of the magnitude, how difficult April was and maybe the magnitude of the bounce back in May and June?

Yes, I did comment on the call in April that April is going to be down, which it was. And I don't have in front of me right now or recall exactly how far down it was, but it was negative. And keep in mind, last year, our same-store sales for the quarter were negative, and I don't really remember year-over-year, but just assume we were negative on top of the negative or something like that, that kind of tell you the magnitude. And then obviously, now we're flat for the quarter. So May and June were pretty good months. You can see the industry data, which I think generally reflects an improving industry during that time period also.

As there are no further questions at this time, I would like to turn the floor back over to Mr. Brett McGill for closing comments.

Well, great. Thank you for everybody for joining us today and all the great questions. Have a great day, and we'll talk to you on the next call.

This concludes today's teleconference. Thank you for your participation. You may now disconnect your lines.