Good morning, and welcome to the MarineMax, Inc. 2021 Fiscal Second Quarter Conference Call. Today's conference call is being recorded. At this time, I'd like to turn the call over to Dawn Francfort of ICR, investor relations for MarineMax.

Thank you, Operator. Good morning, everyone, and thank you for joining this discussion of MarineMax's Fiscal Second Quarter 2021 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 email one to you right away. I now would like to introduce the management team of MarineMax. Mr. Brett McGill, President and Chief Executive Officer; and Mr. Mike McLamb, Chief Financial Officer of the company. Management will make a few comments about the quarter and then be available for your questions. And with that in mind, let me turn the call over to Mike. 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?

Well, thank you, Mike, and good morning, everyone, and thank you for joining us today. On the call, I will share highlights from our second quarter as well as provide an update on the continuing enthusiasm for boating. I will also touch on our positioning into the important June quarter and discuss the meaningful opportunities for MarineMax to create growth and long-term shareholder value in 2021 and beyond. Then I will turn the call over to Mike to review the financial results in greater detail and provide some color on the balance of the year. First, I want to share how proud I am of our team's ability to successfully navigate through this pandemic and produce consistent record results quarter after quarter. From the onset of the pandemic, we effectively pivoted to capitalize on the ongoing changes in consumer behavior resulting in sustained record results. It's important to note that we achieved these results while prioritizing the health and well-being of our team, their families and our customers as well as the welfare of our local economy. We anticipated more than a year ago that boating would be one of the beneficiaries of a changed world. We continue to see that development play out as evidenced by the 45% same-store sales growth and EPS increasing more than sevenfold in the March quarter. Boating continues to be a great way to escape the stresses of everyday life and strengthen the bonds between family and friends. The recent demand for boating has created a foundational layer of new customers. This is driving a replacement and upgrade cycle that is supported by new technology and product upgrades, providing us with confidence that growth is going to be sustained well into the future. These new customers are embracing the boating lifestyle and existing and new customers continue to upgrade to larger and newer boats while also taking advantage of our multiple product and service offerings. I'm honored to be able to lead such an outstanding, passionate and devoted team, and I'm excited about the long-term growth opportunities ahead of us. Let me underscore a few highlights from our March quarter. The record sales and earnings growth we delivered were driven by robust 45% same-store sales growth, which is on top of 1% same-store sales growth a year ago. It's important to note that our new unit growth was the primary driver, which provides the foundation for future sales. Our consolidated margins hit a March quarter record of 30% driven by increasing unit margins and the expansion of our higher-margin businesses, which I'll touch on shortly. Our significant geographic and product diversification and the effective utilization of our digital platform have enabled and driven our growth over the past several years. Additionally, the marine industry continues to experience a significant acceleration in new customers. Given our scale and global position, we continue to benefit from this resurgence and expect these new boaters to support future growth in the coming years. To this point, based on available industry data, we believe we gained market share. Part of our success is due to the strength of our relationships with our manufacturers and the great job they are doing to continue delivering product to us during these high demand periods. From a 6-month perspective, same-store sales growth was up 33% on top of 12% a year ago. We had meaningful improvement across all brands, categories and geographic regions and continue to leverage our investments in technology, which is driving leads that are being converted into sales and enhanced profitability. Profitability-wise, the gross margin strength we produced last quarter continued into the March quarter, increasing 450 basis points to 30%. We realized gains in new and used product margins as well as incremental gains in our higher-margin businesses. Additionally, our last three acquisitions are all contributing to the margin expansion. Fraser Northrop & Johnson, our global superyacht services company, contributed to the growth of our brokerage revenue; while SkipperBud's, with its greater mix of service and storage revenue, helped to drive the overall margin expansion. Additional incremental improvements in finance and insurance as well as service and parts also contributed. Regarding SkipperBud's, we remain very excited about the significant synergies associated with the acquisition, including the sharing of best practices, brands and resources to drive even greater growth in the years to come. In the quarter, the margin expansion and generally good expense control led to operating leverage of 21% and the record earnings and earnings per share of $1.69. Our mission remains being laser-focused on creating an exceptional experience for our customers. We continue to invest in technology, using our flexible model to service our customers in any way they prefer, digitally or in our stores. Our model has created a seamless experience for our customers, which continues to drive market share gains. Now let me touch on our position and share the attributes of the business model we believe will drive ongoing growth in and beyond the important June quarter. We have kicked off this important boating season with strong visibility and are well positioned and prepared to serve our customers. The sheer size of our backlog provides us with added confidence that we should outperform for the second half of 2021 and into fiscal 2022. While this can be impacted from a timing perspective and by our ability to deliver product, we do see demand remaining very strong across the industry. There is also no question that our scale is a competitive advantage as we leverage our deep manufacturing relationships and nationwide shared inventory to support the growing demand. Our strategy to create long-term shareholder value remains focused on driving top line growth, operating leverage, disciplined capital management and building on our strong culture. We continue to effectively execute on our multifaceted growth strategy, supported by our global market presence, premium brands, strategic locations, exceptional customer service and ongoing investments in technology. We remain committed to driving operating leverage in our model and generating significant cash flow growth. We believe the combination of our approach, business model and strong visibility into the balance of the year and into fiscal 2022 will support sustained growth as we move ahead. And with that update, I'll ask Mike to provide more detailed comments on the quarter. Mike?

Thank you, Brett, and good morning, again, everyone. I'd also like to start by thanking our team for their strong efforts that produced record revenue and earnings through the first six months of the year. For the quarter, revenue grew 70% to over $523 million due largely to same-store sales growth of 45%. This exceptional growth was driven by strong comparable new unit growth of 40% and a mix to larger boats. Additionally, our recent acquisitions of Northrop & Johnson and SkipperBud's performed well in the quarter. Our gross profit dollars increased over $78 million while our gross margin rose 450 basis points to 30%. Our record gross margin was due to a handful of factors. Among these are improving margins on new and used boat sales due to increased demand; impressive service and storage performance at SkipperBud's, which has a long track record of performance in these categories; growth in our higher-margin finance, insurance and brokerage businesses, including our global superyacht services organizations of Northrop & Johnson and Fraser Yachts. We would note that the superyacht charter business has remained adversely impacted by travel bans around the globe. Hopefully, with the vaccine rollouts, we will see improvements in the near future. Nonetheless, we are pleased with the current contributions from these businesses. Regarding SG&A, the majority of the increase was once again due to rising sales and the related commissions combined with the two acquisitions we recently completed. Interest expense improved in the quarter due to lower interest rates and a reduction in short-term borrowings given the cash we have generated. Our operating leverage in the quarter was 21%, which drove very strong earnings growth, setting another quarterly record with pretax earnings of about $52 million. Our record March quarter saw both net income and earnings per share rise more than seven-fold, generating $1.69 in EPS versus $0.23 a year ago. For the first six months of the year, our revenue exceeds $934 million. Gross margins are 30%. Our operating leverage is around 20%. Our earnings per share is at $2.73 and our EBITDA is over $92 million, an impressive start to the year. Moving on to our balance sheet. We continue to build cash with about $143 million at quarter end versus $64 million a year ago. As discussed previously, given the attractive interest rate environment, we explored and did secure mortgages on a portion of our sizable real estate portfolio. Besides some slight rate arbitrage, it further positions us to capitalize on opportunities in development. Our inventory at quarter end was $303 million. Excluding SkipperBud's, our inventory is near historic levels on a relative basis. However, I believe it is important to reiterate again this quarter how well our team has pivoted to selling in a lean inventory environment as proven by the very strong unit-driven same-store sales growth this quarter despite historically low levels of inventory. It also does speak to the success of our shared inventory strategy and the strength of our various manufacturing partners. Looking at our liabilities. Short-term borrowings decreased sharply due to lower inventory and related financing as well as an increase in cash generation. Customer deposits, while not the best predictor of near-term sales because they can be lumpy due to the size of deposits and whether a trade is involved or not, rose over 200% due to the demand we are seeing and a contribution from Skipper's. Our current ratio stands at 2.14, and our total liabilities to tangible net worth ratio is 1.05. Both of these are very impressive balance sheet metrics. Our tangible net worth was $381 million. Our balance sheet has always been a formidable strategic advantage, and today more than ever, it can provide the capital for expansion as opportunities arise. Turning to guidance. The March quarter exceeded expectations and industry trends remain strong. Industry estimates for 2021 retail units are now expected to rise from the mid-single digits to the high single digits. Since we usually outperform the industry and grow our AUP on an annual basis, we now expect our annual same-store sales growth to be in the high teens. This is up from the high single digits we guided to in the December quarter and up from the mid- to high single digits we guided to earlier in the year. Given the strength in earnings in March, our guidance also assumes operating leverage improvement above our previous guidance. Accordingly, we are raising our earnings per share guidance to the range of $5.50 to $5.65 for 2021 from $4 to $4.20 that we guided to after the December quarter. In summary, we are expecting our pretax earnings to rise in the second half of the year, which results in the EPS guidance range despite increases in both shares outstanding and our effective tax rate. Our guidance excludes the impact from any potential acquisitions that we may complete. As we progress through the year, we will provide updates as needed to our guidance. Our guidance uses a share count of about 23 million shares versus a little over 22 million last year, and an effective tax rate of 25% versus 23.5% last year. Looking at the remainder of 2021, the March quarter was our easiest comparison with our toughest comparisons in the more meaningful summer quarters of June and September. Turning to current trends. April will close with strong positive same-store sales growth and our backlog is at record levels, providing visibility into next fiscal year. As we have said, industry trends remained strong, and we are generally outperforming these elevated levels. We continue to feel good as we enter the important selling seasons with solid visibility. As Brett discussed, the sheer size of our backlog provides us with added confidence that we should outperform for the back half of 2021 and into fiscal 2022.

Thank you, Mike. Our team's performance for the first six months of fiscal 2021 continues to show excellent execution, even on top of very impressive same-store sales a year ago. We remain focused on creating exceptional customer experiences through our teams, services, products and technology. Our differentiated customer-centric approach continues to ensure MarineMax will meet the needs of the many new customers joining the boating lifestyle, and we will continue to see significant opportunity in our brand expansion and higher-margin businesses. We are active with acquisition and investment opportunities that should strengthen our overall business while staying focused on our long-term strategy. Looking ahead, we remain focused on building our strong team culture, focusing on executing our growth strategy and creating long-term shareholder value. And with that, operator, let's open up the call for questions.

Our first question comes from Fred Wightman with Wolfe Research.

Brett, you had mentioned that you're expecting the industry demand to remain strong, and I think you talked about high single-digit growth for the industry this year, which is better than that mid-single-digit number previously. As we start to lap some of the tougher comparisons last year, it sounds like you guys are still seeing positive trends. But could you just sort of help us frame or set the expectations as we move into the summer months, both you guys and then also as an industry, should they remain positive? Could we see some negative industry numbers? How does that all shake out?

I'll comment, and I'll let Mike touch on it. Like we said, the visibility we have, customer deposits and then the demand we're seeing in the stores, floor traffic, Internet traffic, all of those different things give us quite a bit of confidence in the fact that there'll be some growth. However, like I say, we're up against tough comps and growth. Mike, do you want to come on...

Yes, I believe the industry for 2021 is shaping up positively, with strong demand continuing. When we examine our two-year and three-year comparable sales metrics, there is potential for same-store sales growth, even in the June quarter, which is a challenging 37% comparison. Similarly, in the September quarter, we're looking at a 33% comparison, where the increase is more in dollar terms than in units. However, the strength of our performance suggests there is a good chance for growth in unit sales in the latter half of the year.

Could you please go over the commentary on organic inventory that you mentioned? I believe you stated it was near historic levels on a relative basis, and it was down about 36% last quarter. What is the current status of inventory on a like-for-like basis?

We are maintaining our inventory at lower levels. Without Skipper's, our inventory is likely down around 55% or 50% compared to last year. This demonstrates our capability to sell effectively even with limited inventory and our manufacturers' continued ability to supply us with products, allowing us to achieve strong same-store sales growth. In September, we saw a 33% increase in a low inventory environment, followed by 20% in December, and 45% in March, which is the toughest inventory situation we've faced. I believe our team is performing exceptionally well, and our manufacturers are doing a commendable job in providing us with products.

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

Just want to follow up on the inventory. I'm just curious how your selling process has changed over the past year. If I look at your results, I see revenues up over $200 million year-over-year, I see inventory is down over $200 million year-over-year. And I certainly understand your OEM relationships and having multiple locations helps. But are buyers just that much more comfortable buying a boat they can't physically touch and that they may not get for 6 or 8 weeks?

Yes, Joe. Two things have occurred. We've invested in technology over the years that has proven to be beneficial. I know we repeat this, but it really is an effective tool. Additionally, we've invested in training our sales team. It's important to note that the sales process has slightly changed when discussing boats that may be needed 30, 60, or even 120 days from now. In many cases, customers are currently enjoying a boat, and with the correct approach, we can sell them on a future delivery or order. Our team is performing exceptionally well, and customers are adapting; they don't want to miss out on the remaining boating season, so they are willing to wait. Our manufacturers are also doing a great job providing us with the products, and we are able to turn them around quickly.

Got it. That's helpful. And just maybe on another note, the gross margin. I'm curious if you guys could put the 30% gross margin in the first half into context. How much of that is structural and stays with you in fiscal '22? And how much of that is due to favorable discounting, which may or may not persist?

Yes, Joe. Looking back, we've been discussing our focus on higher-margin businesses for an extended period, and while those have been growing, boat sales have also been increasing, which made it more challenging. Our acquisition strategy reflects our focus in this area as well. In a typical demand environment with standard pricing and discounting, we would aim for our margins to be in this range, and that's our goal. However, there are certainly some favorable conditions in the market regarding pricing right now. Mike, do you want to add anything to that?

Yes. We've given this information in the last quarters and the quarter before. Roughly one-third of the increase on a quarter-over-quarter basis is coming from new and used pricing. The rest of it is what Brett said; it's the strategies we have around our higher-margin businesses. It's Fraser contributing, it's Northrop & Johnson. It's the higher margins coming from SkipperBud's, which all that's sustainable into the future. It's roughly one-third of the pricing components you're probably asking about, Joe.

Okay. So it hasn't changed. Got it.

Our next question comes from the line of Michael Swartz with Truist.

Mike, just wanted to touch on guidance. I know we go through this pretty much every quarter. But as I look at your guidance and then what you've done in the first half of the fiscal year, it does look like you're implying some sort of slowdown in incremental margins in the back half of the year. And I know we just had the commentary around gross margin. So maybe give us a sense of how to think about incrementals in the back half of the year relative to the first half? And then what are some of the puts and takes in that guidance?

Yes. I think part of it is we've still got our biggest summer selling season ahead of us. So we're being somewhat prudent in our guidance. Also, though, when you look at the back half of last year, we do get up against tougher gross margin comparisons for sure in the September quarter. Obviously, it's our intention and our team's intention to keep driving strong gross margin growth, strong flow-through. But I think as you're modeling the business, I think what we've done from a guidance perspective is probably the prudent way, sitting here today looking at the next 4 or 5 months.

Okay. Great. And maybe just secondly, on your backlog today, maybe give us a sense and a little more granularity. I mean how much of that is maybe presold versus units being sold out of inventory that just haven't been transacted yet. Maybe how that looks relative to last year at this time as well.

No, good question. Last year, we had $500 million in inventory at the end of March, which meant we had significantly more available for immediate sale compared to now. Currently, a larger portion of our inventory is presold and not physically in our stores yet, but it is on the way. Our manufacturers and teams are effectively communicating with customers about the arrival dates and scheduling deliveries. As soon as the boats arrive, they are being delivered quickly. This creates a healthy model where inventory is sold as it comes in and then goes out. Therefore, a greater percentage of our sales will be from orders coming in rather than from existing inventory on the ground, considering our current inventory levels.

Our final question comes from James Hardiman with Wedbush Securities.

Great quarter. Really encouraged by I think most notably what you think is going to be your ability to sort of comp the comp, right, to put up positive growth on top of last year's really strong growth numbers in the back half of the year. I guess little doubt that the demand is there to do that. What does it assume about incoming shipments for manufacturers that you're going to be able to comp that comp? Does it assume similar pace of shipments coming in the door versus what you've seen in the last couple of quarters? Does it assume a step-up? And is there any risk to that guidance if supply chain issues sort of come up the system?

Yes, that's a great question. And we really have such a clear visibility to our manufacturers. We're communicating with them regularly, along with the data transfers to look at things. So we have a clear sight on boats that are being built for these customers for sale, some for stock, when will they land literally to the day. And so I'd say we have great visibility on those products. There's always risks to outside factors that could affect those boats getting here. But like we've seen in the last couple of quarters, we watch it closely. The boats arrive within that time frame, and we get them delivered to customers. So I'd say we have great visibility to the arrival dates. Some risk to outside factors.

Do you feel like you're losing out on sales as a result of a lack of inventory? I mean, it's hard to knock 45% same-store sales growth. But do you think that number would be even higher if you got the inventory that you wanted? And does that become more difficult in the bigger quarters to come?

Yes. I mean, clearly, if we had more inventory right now in this high-demand period, you'd probably transact more boats right today. But we have a lot of boats incoming. And like I talked about, our sales team is trained, and it looks like we're getting about every sale we can get. And even in some cases, people might have a preconceived notion of a boat they really wanted that's sold out, let's say, for 6 months to a year, and there's another boat that meets their needs just as well. And so we're able to move people to something like that. Still a great boat for them.

If you examine the industry trends and our main categories, our growth rate significantly exceeds the industry's growth, indicating that we are more effective at sourcing products from manufacturers, and our team is managing it better, leading to higher delivery. Therefore, I don't believe we're losing sales to competitors. Overall, I think we are in a stronger position.

Got it. And then just one last question from me. As I consider the high-teen same-store sales guidance, I have two questions. First, can you provide the total sales number that is being assumed? You've made some acquisitions in the past year, so what does the guidance reflect for total sales growth? Second, what is the average selling price component for that same-store sales growth number? I believe the average selling price contributed about a 5% benefit in the second quarter. If I recall correctly, it was a headwind in the first quarter, but how should I view that for the full year?

I don't have the total sales number on hand right now, but we expect a high-teens overall same-store sales growth rate, primarily driven by units. There will be a component of average unit price, but predicting the exact mix is challenging. The growth will be unit-driven, reflecting the ongoing demand we are witnessing.

Our final question comes from the line of Colton West with Longbow Research.

Congrats on the strong quarter.

Thanks, Colton.

I guess, to start out with, do you see the industry getting back to sort of the 2010 level of 300,000 retail units annually? And if so, if that were to happen in the next few years, is there sufficient capacity in place to be able to meet that level of demand that would be required to get there?

That's actually a great question. So I think anybody in the industry is going to tell you that, yes, we see the industry getting back to those levels. I mean, we see the demand. We see people out there on the water and boating. We see what boating does for families and their friends and so forth. Does the industry have the capacity? That's a good question. I believe it does. I don't believe there have been that many manufacturers that have gone offline. It's a good question. So I believe that it does and/or it will add it. I don't think it's that expensive to open up boat manufacturing facilities in terms of the physical facilities. Obviously, it takes time to get the team and the molds and all that stuff to build the right boats. But a great question.

Okay. And then, I mean, you guys mentioned like really strong growth. I mean, pretty much all around, right? Leads, web traffic, same-store sales of quarters, it doesn't really matter where you look. But what gives you more confidence that you're able to sustain these levels of demand even against the tough comps and even next year, when you think about what the 2021 comp is going to look like?

Yes, it's essentially a guess. The open waterways are crowded with people enjoying boating. They are embracing the lifestyle and getting involved. There's a new segment of customers looking to upgrade. In Florida, there are many more people with new boats in the canals, and it's a sight that spreads enthusiasm. It has become a fantastic option for individuals to stay close to home while spending time with family and friends, all while enjoying the boating lifestyle. That's a straightforward answer, but it's genuinely what we observe. If we weren't seeing so many people actively using their boats, we might start to question how long this trend would last. However, people are definitely out on their boats frequently.

Yes. And then is that momentum still being fueled primarily by the first-time buyer? Or are you starting to see those buyers who maybe didn't buy in 2020, come back to market now that maybe inventory was able to come up a little bit in the off-season months, but I see probably the March retail number reverse that pretty quickly.

It does move around a little. We are seeing some of those buyers that didn't buy in 2020 that have had a boat, and they finally got on order what they had been wanting. But the level of new boaters coming in remains high. It still remains pretty high.

I'd like to turn the call back to management for closing remarks.

Well, thank you, everybody, for joining the call today. And both Mike and I are available all day if you have any questions, feel free to reach out. And we'll look forward to speaking with you on our next quarter.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.