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spk10: Good morning and welcome to the MarineMax Inc. 2022 Fiscal First Quarter Conference Call. Today's conference call is being recorded. At this time, I would like to turn the call over to Dawn of ICR, Investor Relations for MarineMax. Please go ahead.
spk01: Thank you, Operator. Good morning, everyone, and thank you for joining this discussion of MarineMax's Fiscal First Quarter 2022 Conference Call. I'm sure that you've 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 McLam, Chief Financial Officer of the company. Management will make a few comments about the quarter and then be available for your questions. And with that in mind, let me turn the call over to Mike. Please go ahead, Mike.
spk08: 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?
spk09: Thank you, Mike, and good morning, everyone, and thank you for joining this call. Let me start by thanking the MarineMax team for their continued focus and commitment, which drove record sales, record cash flow, and record earnings growth in the quarter. On top of these great financial results, our net promoter customer satisfaction levels hit another new record. This is the most important achievement of all, as it will drive many years of future sales and profitability. Today, I'd like to share highlights from our first quarter, touch on how we are strategically approaching the important peak selling season, followed by a discussion of the results of our strategic growth plan. Then Mike will discuss our financial results in greater detail and provide some color on the balance of the year. Q1 results were a great achievement given the extremely lean inventory and well-documented supply chain issues. With the peak selling season ahead, we expect to build on the strong start to our fiscal year and remain confident that we will continue to enhance long-term shareholder value. Let me touch on the December quarter where we generated 15% revenue growth, record gross margins of 35%, and record earnings per share of $1.59. I'm extremely pleased that our diversified model enabled us to again exceed expectations as we produce robust margins and earnings growth. For the quarter, we are particularly pleased with our strong same store sales growth, which rose to 9%. It's important to note that our same store sales growth was primarily driven by an increase in unit sales, which is notable given the industry-wide supply chain challenges. Additionally, we drove meaningful expansion across essentially all brands, categories, and geographic regions. The marine industry continues to experience consumers embracing the boating lifestyle. This strong demand environment is highlighted by our customer deposits, which exceed $144 million and grew sequentially on top of our strong same-store sales growth. Our team continues to capitalize on consumers actively seeking the boating lifestyle as we leverage our scale, broad geographic presence, product diversification, and digital platform. Based on available industry data, we believe we continue to gain share. From a cadence perspective, the supply chain headwinds improved as we moved through the quarter, benefiting our ability to fulfill customer orders. As many experts in the industry are forecasting, the supply chain environment will most likely stay choppy and not improve materially until late in fiscal 2022. Accordingly, we continue to work closely with our manufacturing partners for the best up-to-date information while working to satisfy the strong demand. Now let me turn to how we are approaching the important peak selling seasons. We are well positioned and prepared to serve our customers. COVID has changed all aspects of customer expectations, including boat shows. Our team has adapted with greater digital capabilities and refocused marketing spend that leverages our stores and our online experience, generating exceptional results. Our deep manufacturing relationships and nationwide shared inventory continue to give us a competitive edge. Many of our brand expansions continue to mature and accelerate within our retailing model, which should keep driving future incremental growth. With the largest selling season ahead, we expect to build on the strong start to our fiscal year and deliver exceptional customer experiences. I also want to underscore our strategic growth plan and how it propels sustained market share gains, revenue growth, and expanding company-wide margins. This quarter, we increased our operating margin by 220 basis points over last year's record to 10%, quite an accomplishment in our historically smallest quarter. This performance is directly attributable to our ability to execute our strategy of growing our higher gross margin businesses. To that point, many of our recent acquisitions have had a higher gross margin profile than is typical in our industry. These strategic acquisitions, combined with improvements in finance and insurance, service, brokerage, and the expansion of our substantial storage operations, has resulted in structural enhancements to our gross margin profile. Additionally, as we integrate our acquisitions, they continue to perform very well and are aligned with our strategy of contributing to MarineMax's record margin expansions. From a profitability perspective, one of the best elements of the quarter was once again our strong gross margins at over 35%. The meaningful margin expansion in the quarter was bolstered by increased product margins and our higher margin businesses that drove significant operating leverage in the quarter. To that point, the margin expansion and controlled SG&A levels produced an impressive 26% operating leverage in the quarter. The combination of gross margin expansion and focused expense management resulted in a record $1.59 of EPS for the quarter. In the December quarter, we added Texas Mastercraft and Intrepid powerboats to our family. These acquisitions combined generated over $100 million in revenue in 2020. We are seamlessly integrating these businesses into MarineMax and believe many opportunities exist for sharing best practices and resources to drive even greater growth in the years ahead. Now let me discuss the confidence we have that our strategy will continue to create sustained growth and long-term shareholder value in 2022 and beyond. We continue to make significant progress on our vision of creating exceptional customer experiences through best services, products, and technology. This is evidenced by our record net promoter customer satisfaction scores that I mentioned in my opening comments. Our team remains focused on these initiatives, resulting in strong demand and margins. We will accomplish this through our global market presence, premium brands, valuable real estate locations, exceptional customer service, technology investments, strategic acquisitions, industry-leading inventory management, And finally, our unwavering commitment to build on our strong company culture. Supported by one of the strongest balance sheets in the industry, we will actively make strategic accretive acquisitions in a disciplined manner. Our broad global geographic presence has allowed and will continue to allow us to grow by adding additional dealers, marinas, storage, service-related offerings, manufacturing, and asset-light businesses. We believe the combination of driving operating leverage and generating significant cash flow, coupled with strong consumer demand, will result in sustained growth well into fiscal 2022 and beyond. And with that update, I'll ask Mike to provide more detailed comments on the quarter. Mike?
spk08: Thank you, Brett, and good morning again, everyone. I'd like to also start by thanking our team for producing another record quarter driven by strong same-store sales growth, gross margin expansion, and great operating leverage. For the quarter, revenue grew 15% to $473 million, largely due to same-store sales growth of 9% and the contribution from our various recent acquisitions. Our 9% same-store sales growth was driven primarily by unit growth, which is impressive given the continued industry-wide supply chain challenges. Overall, our growth has been demand-driven across generally all segments of products and every global market. A big takeaway from our results this quarter is our ability to post very strong comps on top of already strong comps. Our 9% growth this quarter was on top of 20% and 24% the last two years, which were also largely unit-driven. Our gross profit dollars increased over $43 million where our gross margin rose 540 basis points to over 35%. Our record gross margin was due to several factors. Among these are improving margins on new and used boat sales, impressive service, parts, and storage performance, expansion in our higher margin finance, insurance, and brokerage business, as well as growth in our global superyacht services organizations of Northrop & Johnson and Fraser Yachts. Our higher margin businesses have been a focus of ours for some time, including our acquisition strategy. Only about a third of our margin improvement in the quarter came from growth in new and used margins. The remainder was expansion of our higher margin businesses. Regarding SG&A, the majority of the increase was again due to the increase in sales and related commissions combined with the recent acquisitions. We believe SG&A overall is generally on track on an annual basis, but we will watch the inflationary pressures carefully. Our operating leverage in the quarter was about 26%, which drove very strong earnings growth, setting another quarterly milestone with pre-tax earnings of over $46 million in historically our smallest quarter. Our record December quarter saw both net income and earnings per share rise over 50%, generating $1.59 in EPS versus $1.04 a year ago. These results include a limited contribution from the two acquisitions we completed in the quarter. Moving on to our industry-leading balance sheet, we continue to build cash with over $216 million at quarter end versus $121 million a year ago. Our inventory at quarter end was down 14% to $325 million from last year, but excluding the acquisitions, our inventory is down closer to 25%. Looking at our liabilities, short-term borrowings decreased 31% due to lower inventory and related financing, as well as the increase in cash generation. Customer deposits, while not the best predictor of near-term sales, increased sequentially around 50% from September to over $144 million due to the timing of orders and strong demand along with a contribution from Intrepid. Our current ratio stands at 1.57 and our total liabilities to tangible net worth ratio is 1.40. Both of these are very impressive balance sheet metrics. Our tangible net worth is $386 million. Our balance sheet has always been a formidable strategic advantage and today more than ever, It continues to protect us in uncertain times while providing the capital for expansion as opportunities arise. Turning to our outlook for fiscal 2022, the December quarter certainly exceeded expectations and industry demand trend remains strong. The challenge in 2022 remains around the assumptions for the supply chain. Today, given what we are being told from our various manufacturing partners, we continue to expect retail unit growth in 2022. However, it is also clear that uncertainty exists in the ultimate visibility due to the supply chain challenges. As such, we think it's prudent to continue to expect flattish unit growth until we are able to successfully move through more seasonal quarters. This, combined with increases in our average unit selling price, should provide annual same-store sales growth around the mid-single digits. Including the remainder of the cruisers and Nisswa acquisitions, along with Intrepid and Texas Mastercraft, we expect total annual revenue growth in the mid-teens. We do hope the supply chain will improve and allow us to have upside as we move through the coming quarters. Given the inflationary pressures in the marketplace, as noted on our last call, we do expect modest gross margin pressure. We have levers to mitigate these pressures, but believe it's prudent to include in our expectations for now. Our guidance is also before any other acquisitions that we may complete. Using the low end of our historical leverage range, plus a modest share increase and a tax rate of 25%, results in our earnings per share guidance range of $7.60 to $8.00. This implies fiscal 2022 EBITDA of over 260 million. Turning to current trends, January is forecasted to end with positive same-store sales growth, and our backlog is at record levels. As we have said, industry demand remains strong, and we are generally outperforming these elevated levels. With those comments, I'll turn the call back over to Brett for some closing comments. Brett?
spk09: Thank you, Mike. MarineMax continues to benefit and capitalize on the surge in demand and the desire of consumers to embrace the boating lifestyle. Our team's performance to start the fiscal year has shown continued excellent execution, even on top of a very impressive same-store sales a year ago. The original vision for the creation of MarineMax was to create a better customer experience by building a team that is dedicated to the passion and lifestyle of boating. We continue to work hard to deliver on this, and this is the success of our model. We remain committed to the long-term financial strength of the company and will pursue additional brand expansion and higher margin businesses to support our strategy to create long-term shareholder value. And with that, operator, let's open up the call for questions.
spk10: Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Fred Whiteman with Wolf Research. Please proceed with your question.
spk04: Hey, guys. Good morning. Thanks for the question. Maybe just to start, could you touch on – I get that it's tough to predict sort of the unit delivery cycle, but can you talk about the unit number that's included in that January same-store sales commentary, which you are expecting to be positive? It's just moved around a lot, so how should we think about that?
spk08: Yeah, good question, Fred. We don't really give on a month-by-month basis. I know we do say that we're going to – have same-store sales growth as January closes up. And actually, I don't recall right now really if it's going to be up or down, but I would tell you that we've had some – in the December quarter, we had some good supply chain activity positive, which is how we had the unit growth in the quarter. However, I think the message is that there's still some choppiness out there, and it seems like it's a different problem on any given day with each different manufacturer. So I think until we move more through these seasonal quarters – I think our guidance number of, you know, flattish until we get further into the year probably makes the most sense with the uncertainty.
spk04: Okay, that makes sense. And you guys both had positive comments on sort of the medium and the long-term outlook for the business, and I know that you guys have historically been active on the M&A front, but could you just sort of touch on, you know, the potential to lean into the buyback here just given the valuation and sort of how the stock has performed? especially since I think that's set to expire in March of this year. So any thoughts there would be helpful.
spk08: Yeah, you can imagine we have a 10B5 plan in place that would be buying as prices drop, and we're aware of when the current plan expires, and we would be at least talking to our board about reactivating that plan before it expires. So we're aware of those dates. You know, I'd say that, you know, we've been public for a long time, and there's been other times where the valuation of the company gets dislocated from what it, you know, should be reality. And in those time periods, we've always been a little more active in our share buybacks. We do continue, however, to look at, you know, the long term at about, you know, good, strong businesses to bring into the company with good, strong management teams. So, you know, it's a balance of what's happening right now from a valuation perspective, as well as We're trying to take the company long-term. So I think we'll be looking at both avenues, you know, obviously buy back some stock when it makes sense and continuing our discussions with different opportunities to expand the business and grow it for the long-term.
spk04: Great. Thanks, guys.
spk08: You're welcome.
spk10: Our next question comes from the line of Eric Wold with B. Reilly Securities. Please proceed with your question.
spk05: Thank you. Good morning, Brett and Mike. Obviously, great same-store sales, which obviously can be influenced somewhat by satisfying past orders getting delivered by OEMs as kind of the supply chain opens up. Maybe a great deposit number that can grow sequentially. Maybe just kind of anecdotally, anything you're seeing kind of real-time in terms of dealer traffic, You know, the mix of first-time voters coming into dealerships, you know, stock market choppiness, requests around deposits. I mean, anything that kind of would give you pause in terms of where we are in kind of the demand cycle?
spk09: Yeah, Eric, it's Brett. It's a great question, and we monitor almost all those things you listed literally on a daily basis, website traffic, lead generation. everything going on on the website, and those numbers continue to be very strong, which is just, you know, we're watching it close to look to see if, okay, when will this kind of settle down a little bit? But demand is still strong. We watch first time to Marine Max buying boats. We watch that percentage, and it still remains high, which is great news for the industry, new people coming into boating. And so the only little thing out there that, you know, that we watch, and this is just common, is some really hot models that have an extremely long time frame to wait to get a boat. I would call those cooled off because if you can't get a boat for two years, that model, but I would tell you we still have activity around some of those models. It's striking. So we watch that a little bit. So to finally answer your question in summary is Demand and traffic, everything continues to be very strong.
spk08: Actually, I'll add one comment to what Brett's saying, and I said it during my prepared remarks, but our customer deposits are up 300% from a year ago, and the 12 months leading from then until now were a pretty good 12-month period for the marine industry and for us, and our deposits are up 300% going forward. our deposits are up about 50% from September. So just three months ago, our deposits are up 50% during a quarter where we actually produced same-store sales growth. So if you think about how that math works, deposits are leaving the balance sheet as we're delivering the boats. We're adding deposits. So to actually build the deposit line by 50% in one quarter and also have 9% same-store sales growth, I think should let people know demand is still pretty good in the recreational marine retail environment.
spk02: Perfect.
spk05: And then just a final question, you know, inventory's up, you know, 40-ish percent sequentially. You know, are you getting stock inventory back on the floor? Is that kind of transitory inventory that kind of hit your balance sheet but was kind of going out to, you know, already purchased boat buyers and kind of in this quarter? How would you kind of frame you know, where your floor inventories are, you know, maybe on a percentage basis versus kind of where you'd like them to be.
spk08: I was actually expecting a question about that from sequentially, but so there is some, I'll say, very modest building or increases in inventory when you add up all of our locations. Yes, we have a little bit more inventory on the ground seasonally today. What's also in that number are deposits because as As our customers are paying us deposits, we do pay some manufacturers to deposit for boats that are coming a year from now or 18 months from now. So that's in there. So that's not something we can deliver today. Then technically right in the December quarter, we had boats coming from international suppliers. So they're literally on the oceans that are coming to us for delivery, hopefully during the March quarter. And so that, again, is products you can't actually deliver right then because they're out in the ocean. It was, you know, those handful of things made it look like we may have actually more inventory in our stores because, trust me, it's still pretty lean in the store environment.
spk09: Yeah, when you break it down and look at what's on the showroom floors, you know, other than maybe some, you know, more entry, not entry level, but maybe we'll call them pontoon boats in the northern markets.
spk07: Right.
spk09: You know, shy of that, I'd say there's less boats for sale available in each store.
spk02: Very helpful. Thanks, guys. Thank you, Eric.
spk11: Our next question comes from the line of Joe Altobello with Raymond James.
spk10: Please proceed with your question.
spk07: Thanks. Hey, guys. Good morning. First question is to follow up on Eric's regarding inventory. Given your revenue guide for 22, do you guys expect to end the year with inventory up versus 21 or flattish?
spk08: No, I actually, it's a good question. I do, you know, I'm kind of going with what the industry is saying and what people are talking about that, you know, I think the expectation is sometime during the summer, the supply chain issues hopefully will get better, although I'm not really sure if anybody really knows. I think everybody's just kind of punting the answer until then. But if the supply chain gets better, I think technically we'll, we'll probably have some more inventory, but it's still going to be extremely lean if you walk into any one of our locations. And with the backlog, just about as fast as it gets here, inventory is going to be going out. But I would think technically if the supply chain does get a little bit better and if we end up seeing better unit growth than maybe even what's in our guidance, then, yeah, there could be a little bit more inventory on the ground. Okay.
spk07: In terms of the EPS guide, you raised the midpoint by about $0.45. What's baked in for Intrepid and Texas Mastercraft in that number, since that wasn't in the old guide?
spk08: Yeah, good question. There's a couple analysts that have come out there, and they've put numbers out from $0.15 to $0.25. And I think when you look at the cash that was used to make the two mergers, we've baked in around $0.20 for both those for the full year. Both businesses are performing well. Texas Mastercraft's a little more seasonal, so we had it for two months in the quarter. And Intrepid's doing great, and certainly glad to have them on board. But, yeah, thanks for asking that. And in the quarter, I did comment there was a little bit of contribution from both, less than a nickel, just given some of the costs to acquire them that also were in the quarter. But thanks for asking that, Joe.
spk07: Got it. And just one last one, if I could. You guys own a fair amount of Florida Waterfront real estate. And as you're well aware, it's done very well from a price standpoint. I know you've started to monetize a portion of that, but do you have any plans to do more of that in 22 and beyond?
spk08: You know, we constantly look at our balance sheet and look at how we best leverage the the company. We are always exploring different ideas. I wouldn't say there's a hardcore plan in place, but your point is accurate. We own a lot of real estate. We actually bought some more this quarter, and we do think it's the fair value greatly exceeds what it's on our books for. We think that's a great long-term strategy for this business. I think you'll see us continue to buy great you know, unique waterfront properties, especially if we can do, you know, storage on them. And I think you'll see us, you know, we're not going to buy a property that's necessarily top of the market. We'll try to get, you know, properties at the right valuation, which is what all of ours have been, we believe. But there's a lot of capital and a lot of potential capital that's tied up in our real estate for sure.
spk02: Okay. Got it. Thank you, guys. Thank you.
spk11: Our next question comes from the line of Mike Schwartz with Truist Securities. Please proceed with your question.
spk06: Hey, guys. Good morning. Mike, maybe just on guidance, I think you had mentioned your guidance is predicated upon operating leverage kind of in that more historical range. I think you've talked about maybe 12 to the mid-teens historically. You did 26% this quarter. I think over the past five or six quarters, you've averaged something around 20%. So maybe just a sense of why you think that 12 to maybe mid-teens is more correct going forward relative to what we've seen of late.
spk08: Well, your point of late is accurate. I mean, of late, our flow through has been really strong, including 26% this quarter. Really, 2021 was a breakout year from a model perspective and where margins went. Our hope is that as we go through this year, we can update guidance and we'll be more successful on the overall flow-through of the business, which if you think fundamentally as margins rise, it should be there. I think we're just probably being a little prudent since it's early in the year. We certainly hope to be able to update that target as we move throughout the year. Then fundamentally, As we finish the second year, let's say we finish 2022 with strong margins and we're looking at the different acquisitions we've done, we've got to start thinking, okay, is that 12% to 17% actually now? Has it changed because of, I think Brett said it, the margin profile of the company I think is changing. Even if you take away the upside that we're seeing today on new and used product, I think each quarter I say something like of our margin improvement around a third-ish has been new and used, which means two-thirds have been coming from the changes we've made in the business, whether it's growing F&I and storage or some of the acquisitions that we've done that have a higher profile. So we're trying to evaluate all that and to be able to direct and give, you know, you guys guidance around, you know, what's the model changing to? Is it 26% flow through? Is it 22? So part of it's kind of early in some of these acquisitions we've done and, you We hope to be updating that as we've moved through this year and the next years.
spk06: Okay, great. And maybe on a related topic in very near term, just the current quarter, the Miami show is a couple weeks away, and obviously that didn't occur last year. So I'm just wondering how we should think about maybe adding some costs back relative to last year just from that show.
spk08: Yeah, it's a good point. I mean, there will be some incremental marketing costs, but
spk09: Yeah, I think we also have a lot of shows going on right now around the country that we're not attending. So I think we've tried to put a different balance on things, on what we're going to. So a lot less shows that we're going to this year just because there's no inventory and pipelines full, all the reasons you know.
spk02: Okay, great. Thank you. Thank you, Mike.
spk11: Our next question comes from the line of Jerick Johnson with BMO Capital Markets.
spk10: Please proceed with your question. Great. Thank you. Good morning.
spk00: I was interested in model year price increases, you know, like for like price increases on existing models. And then if that is up, I assume it is, how confident are you about consumers' ability to pay higher prices going into 2022?
spk08: Yeah, it's a great question. I think we've touched on this a couple times on calls. I'd say high single digit. In some cases, there's maybe a double digit increase on it. If you're looking at kind of what's selling, you know, like in June versus, like June 22 versus June 21, and the demand that we're continuing to see, I'll make a comment on our backlog. Obviously, what we're writing contracts today is on product that has, you know, price increases. I think the demand for the boating lifestyle and to get out there and enjoy boating with your family and friends is today stronger than what the price increases have seen. It continues to be strong.
spk09: We watch it very closely. We're very sensitive about our pricing. We watch to see if there's any volume decrease as some prices increase. We'll watch it. The good news is is the brands and the models we carry. Even within one brand, there's so many models that can fulfill the same boating need for a customer. So maybe two years ago they wanted a 35-footer. A 31-footer has a lot of great features and the same benefits. So as the years evolve, we've got enough product to hit whatever price point the consumer feels comfortable with. But we're watching it closely.
spk00: Okay, okay. Then I realize this might be overly simplistic, but if your same-store sales are up 9% and basically units, you're seeing high single-digit price increases. So it would be safe to assume you're selling more lower-priced boats in the fourth quarter?
spk08: You know what? Technically, it's a mix. For the fourth quarter, I would confirm that we delivered probably a greater percentage of – smaller product, and it really has to do with people that have been waiting on their boats, and it's just when we got them from the manufacturer. So on a year-over-year basis, we did deliver a greater percentage of smaller product than we typically do. The December quarter is typically a quarter, and so is the March quarter to a degree, that is skewed by larger product, primarily coming out of Florida as northern markets cool down. But today, it doesn't matter where the consumer is. If they're in Minnesota or Florida, if their boat is available and it's finished at the manufacturer, they take delivery, and then we recognize the sale. So it's kind of smoothed out some of the, you know, maybe some of the seasonal patterns as the boats are coming off the line.
spk00: Okay, I see.
spk02: Great. Thank you very much. Thanks.
spk11: There are no further questions in the queue.
spk10: I'd like to hand the call back to management for closing remarks.
spk09: Thank you all 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 look forward to talking with you at our next call. Have a great day.
spk10: 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.
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