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 Frankfort of ICR, Investor Relations for MarineMax. Please go ahead.
Thank you, operator. Good morning, everyone, and thank you for joining this discussion of MarineMax's fiscal 2nd 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 e mail 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, Don. 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 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 Q2 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 produced consistent record results quarter after quarter. From the onset of the pandemic, we effectively 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 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 replacement and upgrade cycle that is 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, 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 voters to support future growth in the coming years. To this point, based on available industry data, we believe we gain market share. Part of our success is due to the 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 4.50 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 and North Johnson, our global superyacht services company contributed to the growth of our brokerage revenue, while Skipper buzz 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 contributing.
Regarding Skipper Buds, 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 positioning 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 twenty twenty one and into fiscal twenty twenty two. 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 There is also no question that our scale is a competitive advantage as we leverage our deep manufacturing relationships 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 in the fiscal 2022, we'll support sustained growth as we move ahead. And with that update, I'll ask Mike I'd like 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 1st 6 months of the year.
For the quarter, revenue grew 70% to over $523,000,000 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 and Johnson and Skipper Buds also performed well in the quarter. Our gross profit dollars increased over $78,000,000 while our gross margin rose 4.50 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 Skipper Buds, 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 and 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 and A, the majority of the increase was once again due to rising sales And the related commissions combined with the 2 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 pre tax earnings of about $52,000,000 Our record March quarter saw both net income and earnings per share rise more than 7 fold generating $1.69 in EPS versus $0.23 a year ago. For the 1st 6 months of the year, our revenue exceeds $934,000,000 gross margins are 30%, Our operating leverage is around 20%. Our earnings per share is at $2.73 and our EBITDA is over 92,000,000 An impressive start to the year. Moving on to our balance sheet, we continue to build cash with about $143,000,000 at quarterend Versus $64,000,000 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 as they develop. Our inventory at quarter end was $303,000,000 Excluding Skipper Buds, 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 The size of deposits and whether trade is involved or not rose over 200% due to the demand we are seeing and a contribution from skippers. 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 381,000,000 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 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 pre tax earnings 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 23,000,000 shares versus a little over 22,000,000 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 with our toughest comparisons in the more meaningful summer quarters of June 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 remain 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 twenty twenty one and into fiscal 2022. With those comments, I'll turn the call back over to Brett for some closing comments. Brett?
Thank you, Mike. Our team's performance in the 1st 6 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 We'll meet the needs of the many new customers joining the Bling 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,
Thank you. We will now be conducting a question and answer Our first question comes from the line of Fred Whiteman with Wolfe Research. Please proceed with your question.
Hey, guys. Thanks for taking the question. 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 compares from 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 for 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 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 you say, we're up against tough comps and growth. Mike, do you want to comment on that?
Yes. I just would say, I think the industry overall for 2021 now is looking we'll be talking more on the lines of the growth that we're talking about and demand continues to be very strong. Specifically, if you look at us, if you look at our 2 year comp stack or our 3 year comp stack, it does indicate that there's a potential for same store sales growth Even in the June quarter, which I know is a 37% comp, which is tough to do, and also in the September quarter, which is 33%, that's more dollar growth versus unit growth. But
Makes sense. And just on the inventory, would you mind just running through that organic inventory commentary that you made again? Think you said it was close to historic levels on a relative basis. That was down, I think, 36% last quarter. So where is inventory on
Keeping inventory at lower levels. Without skippers, our inventory is probably down in the neighborhood of 55% or 50% on a year over year basis, but I think it speaks to our ability to continue to sell in a lean inventory environment And also our ability for our manufacturers to keep getting us product that we can keep driving strong same store sales growth. We had 33% in September in the lean inventory environment. We had 20% in December. We have 45% in March, which is the leanest environment we've operated in.
So I think our team is working great. Our manufacturers keep doing a good job getting this product.
Great. Thanks, guys.
Thank you.
Our next question comes from the line of Joe Altobello with Raymond James. Please proceed with your question.
Thanks. Hey, guys. Good morning. Good morning. Just want to follow-up on the inventory discussion.
I'm just curious how your selling process It has changed over the past year. If I look at your results, I see revenues up over $200,000,000 year over year. I see inventories down over $200,000,000 year over year. 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. 2 things have happened, right? We've We've invested in some technology over the years that have helped us. I know we keep saying that, but it's a powerful tool for us. And then we've invested in training for our sales team, which You can't miss out on that.
The sales process changed slightly when you have to Talk to a customer about a boat that's 30 days away, 60 days, maybe even 4 months away, that process of In a lot of cases, they're enjoying a boat now and you can through the right process, you can sell them on a future slaughter, Our team is doing a great job and the customers are finding a way to accept They don't want to miss out on whatever boating season is left. So they're willing to wait and our manufacturers are doing a good job getting us the products and we're turning them quick.
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 in the context, how much of that is structural and stays with you in fiscal 2022? And how much of that is due to favorable discounting, which may or may not persist.
Yes, Joe, if you go back and look, I mean, we've been talking about our Strategy of higher margin businesses for a long time and we kept those have been growing, but both sales were growing as well, which made it tougher. Our acquisition strategy has shown that we're focused in that area as well. So we really have a strategy that wants to get our In a normal demand environment, in a normal pricing discounting environment, we'd love to see our margins in this range And that's our strategy. But clearly, there's some tailwinds from pricing In the market right now, Mike, I don't know if you want to comment on that. Yes.
We gave this information in the last quarters and the quarter before. Roughly a 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 and Johnson, it's the higher margins coming from Skipper Buds, which all that's sustainable into the future.
It's Roughly a third is the pricing components you're probably asking about, Joe.
Okay. So it hasn't changed. Got it. Thank you, guys.
Thank you.
Our next question comes from the line of Michael Swartz with Churis. Please proceed with your question.
Hey, good morning, guys. 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 Slow down in incremental margins in the back half of the year and I know we just had the commentary around gross margin. But 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 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 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 pre sold versus units being sold out of inventory that just haven't been transacted yet? It may be how that looks relative to last year at this time as well?
Yes, good question, Bill. Obviously, last year was we had I think we had $500,000,000 of inventory when we ended March. So we had much more that would be sold on the ground than we do now. So more of it's Presole not in our stores, but coming. But again, the manufacturers and our teams are doing a great job staying communicated with our customers as the dates, When their boats are coming in, scheduling deliveries, getting the boats really as fast as they come in, they're going out.
And so it's kind of A healthy model, quite frankly. Inventory sold, it comes in and goes out. So no, a greater percentage for sure is going to be sold on order coming in than on the ground, just given where inventory
Our final question comes from the line of James Hardiman with Wedbush Securities. Please proceed with your question.
Hey, good morning, guys. Hey, good morning. Great quarter. Good morning. Really encouraged by, I think most notably what you think is going to be your ability to sort of comp to 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 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 gum 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 risk to outside factors that could affect those boats getting here. But like we've seen in the last couple of quarters, We watch it close, the boats arrive within that timeframe and we get them delivered to customers. So I'd say we have great visibility to the arrival dates, Some risks to outside factors.
Do you feel like you're losing out on sales as a result of A lack of inventory means 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 a bigger in the bigger quarters to come?
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 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. And Yes.
I think if you look at the specifically if you look at the industry trends and RT categories, our growth rate is Considerably higher than the industry's growth, which would tell you we're doing better getting product for manufacturers and our team is handling it better and we're delivering more buzz. So I don't think we're losing a sale necessarily just somewhat down the street. So I think we're in probably better position quite frankly.
Got it. And then just last question for me. As I think about this high teens same store sales guidance, Well, I guess two questions. Hey, can you give us a total sales what's the total sales number assumed? Obviously, you've had Some acquisitions in the past year.
So what is the guidance assumed for total sales growth? And what's the ASP Component to that same store sales growth number, I think it was a ASP was about a 5% benefit here in the second quarter. If memory serves, I think it was a headwind in the Q1, but how should I think about that for the full year?
Yes. Actually, I don't have the total sales number right at my fingertips right now, but it'd be High teens overall same store sales growth rate, that's going to be driven by units at the end of the day. I mean, there's going to be a component of AUP, the exact mix of that's a little tough to predict, but it's going to be unit driven, which is speaking to the demand that we're continuing to see out there.
Got it. Okay. Thanks guys.
Thanks James. Thank you James.
Our final question comes from the line of Colton West with Longbow Research. Please proceed with your question.
Hi, guys. Congrats on the strong quarter and thanks for taking my questions.
Thanks, relative.
I guess, To start out with, do you see the industry getting back to sort of the 2010 level of 300 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's 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 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 basic as it gets. The waterways where waterways are open are packed. People are boating. They're loving the lifestyle.
They're getting involved. There's this new layer of customers that want to upgrade. There's more people in a canal in Florida that Have a new boat and everybody sees it driving by the canal. It's infectious and it's really turning on to be a great alternative For people to stay close to home and with their family and friends and enjoy the boating lifestyle. That's a real basic answer, but it's Truly what we're seeing and we weren't seeing as many people out there using their boat.
Of course, then you start wondering how long will that stay, but they're out using their boats A lot.
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 reversed that pretty quickly.
It does move around a little. We are seeing some of those buyers that Didn't buy in 2020 that had a boat and they finally got in on order what was what they had been wanting, but The level of new boaters coming in remains high. It still remains pretty high.
Okay, great. Thanks so much for taking the questions.
Thanks, Carlton. Thank you.
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.