Shannon Devine – IR Mike McLamb – EVP, CFO and Secretary Bill McGill – Chairman, CEO and President.

Jimmy Baker – B. Riley Mike Swartz – SunTrust Andrew Grone – Dougherty & Company.

Good day and welcome to the MarineMax Inc third quarter 2014 earnings conference call. Today’s conference is being recorded. At this time I’d like to turn the conference over to Ms. Shannon Devine at ICR. Ma’am, you may begin..

Thank you, Operator. Good morning, everyone, and thank you for joining this discussion of MarineMax’s 2014 fiscal third quarter results. I am sure that you have all received a copy of the press release that went out this morning. If you have not please call Linda Cameron at 727-531-1700 and she will then fax or email one to you right away.

I would now like to introduce the management team of MarineMax, Bill McGill, Chairman, President and Chief Executive Officer; and Mike McLamb, Chief Financial Officer of the company. Management will make some comments about the quarter and then be available for your questions. With that, let me turn the call over to Mike McLamb.

Mike?.

Thank you, Shannon. Good morning, everyone, and thank you for joining this call. Before I turn the call over to Bill, 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 may cause actual results to differ materially from expectations.

These risks include but are not limited to the impact of seasonality in 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 Bill..

Thank you, Mike, and good morning, everyone. It is great to see the 22% growth that our team created in the most meaningful quarter of the year. Our 22% same-store sales growth was on top of a strong 16% growth last year and is the evidence of continuing industry recovery.

As we discussed on the last call, we stated the June quarter had an increase backlog from deals we were not able to close in the March quarter primarily due to weather. While the weather drag continued through May, we were still able to generate healthy increase each month of the quarter, finishing with a strong June.

With the impact from weather hanging over our resolve, we made a decision to be more aggressive with marketing and, to a degree, with pricing and both ended up contributing to our strong results. The industry data throughout the quarter was mixed but June showed encouraging signs in most categories.

However, as we all have better and quicker access to industry data, it is critical that the segments that are most meaningful for us are the ones that are keenly evaluated, namely the stern drive and inboard boat segments, which at best were varied in the quarter.

Despite the industry choppiness based on the preliminary share information, MarineMax produced meaningful share increases in most geographic markets and categories. But most exciting is that it was one of the best unit growth quarters we had seen since before the recession began.

What is also encouraging is that of all the categories in which we operate, we saw the greatest unit strength in stern drive boats, which has been lighting other industry categories during the recovery. It certainly would be nice to see this trend continue.

Our charter business also experienced considerable growth during the quarter as the benefit from our marketing and brand awareness are paying off.

From a consolidated margin perspective, the high growth we experienced in boat sales, which was partially fueled by our added aggressiveness in price promotions and marketing, resulted in a year-over-year decline in margins.

Keep in mind that boat sales is the lowest margin product we sell when compared to the higher margin products like service, parts and accessories, financed insurance and brokerage. We also saw growth in larger products which tends to lower the margins.

Nonetheless, our margins were still in line from a historical perspective and, while variability quarter to quarter will persist, we expect to see healthy margins throughout this recovery on an annual basis. Increase in new boat sales was strongest in our largest brand, Sea Ray.

What is encouraging about this is that we experienced this growth with the existing models and without most of all the new models that are currently planned to come online. However, the existing models do require more discounting, which did pressure margins in the quarter.

We expect exciting new models who will contribute even greater to sales and gross margins when they are available over the next few model years. Other categories that showed strength to a larger product and center console outboard fishing boats.

As I mentioned earlier, all of our markets were impacted by the (stubborn old Whaler) earlier in the year and it trickled into the beginning summer months. That said, we experienced growth in most of our regions during the quarter. And with this update, I’d like to ask Mike to provide more detailed comments on the quarter.

Mike?.

Thank you, Bill, and good morning, again, everyone. For the three months ended June 30, 2014, our revenue increased about $39 million to over $214 million. Our same-store sales increased about 22%, which as Bill said was on top of double digit growth last year.

We started the quarter with a good sales backlog and, as the quarter progressed, we were able to produce meaningful unit growth with Florida and New Jersey being our top performers. A year after Hurricane Sandy, New Jersey seems to be making a meaningful recovery and momentum is building.

Florida, where about 50% of our business is located, continues to be an asset for us. Gross profit increased almost 16% to more than $54 million for the quarter. Gross profit as a percentage of revenue decreased to 25.3% from 26.6% last year due to the reasons that Bill mentioned.

When looking at our selling, general and administrative expenses, you need to add back the $7 million damage recovery we received last year related to the Deep Water Horizon oil spill.

Adding that $7 million back, the last year’s actual SG&A shows that we had a slight increase in expenses year-over-year but shows we generally had good leverage in the business and a reduction in SG&A as a percentage of sales.

Interest expense decreased slightly despite an increase in outstanding borrowings because we lowered our rate on our line a year ago. Interest expense as a percentage of revenue decreased also for the quarter. The company had no income tax expense for the quarter.

Our effective income tax rate will remain essentially zero for the near term primarily due to the availability of substantial net operating loss carry forwards which are fully offset by evaluation reserve.

For the quarter, after adjusting for BP last year and ignoring taxes in both periods, our earnings this year grew over 100% to $11.5 million or $0.47 per diluted share compared with $5.6 million or $0.23 per diluted share last year. As for the year-to-date figures, I will comment on only a few items.

First, our same-store sales have grown about 5% compared with 13% last year. Overall, our margins have performed reasonably well and modestly improved year-over-year. SG&A increased slightly in dollars when you add back the Deep Water Horizon recovery and decreased as a percentage of revenue, again, getting decent leverage in the business.

Net-net, excluding the recovery last year and ignoring taxes our earnings are up more than three times. It’s nice to see the year-over-year improvement in business despite the weather issues that we were dealt. What is really encouraging is that we are seeing good earnings improvement while our core segments are still finding their sea legs.

Additionally, our largest supplier has considerable new products under development which should be good drivers of future revenue. Turning to our balance sheet, at quarter end we had approximately $42 million in cash plus a significant amount of liquidity in the form of unlevered inventory.

The increase in cash is due to the timing of borrowings and repayments on our four point financing facility plus we had a strong close to the quarter. Inventory decreased slightly from last year. Given our sales growth, we feel good about how we are positioned from an inventory perspective.

As we look to the future, we are trying to carefully match the timing of new products and inventory with each supplier but with Sea Ray in particular given the efforts they have underway. Overall, the aging of the inventory at current levels are in good shape.

Turning to our liabilities, despite our growth, our short-term borrowings decreased by over $11 million to $131 million. The decrease in borrowings and strengthening in our current ratio and balance sheet is due to the significant cash we generated in the quarter.

We always say it’s hard to get a good sense of business from our customer deposit trends. While the dollars are in fact down, due to the timing and size of deposits last year, we feel very good about the larger boat business, which generally drives this line item. Our balance sheet is strong.

We ended the quarter with a current ratio of 1.7 and total liabilities (inaudible) ratio of 0.77. Both of these are very strong ratios. Our tangible net worth stands at around $233 million. We own about half of our locations, which are all debt free and we have no other debt except for the inventory financing that I mentioned.

As for current trends, I’ll remind you that last September quarter we had solid same-store sales growth of 7% which was on top of 18% in the year before that, so we were up against a tough comparison. Having said this, we did start the quarter with a meaningful increase backlog versus the same period a year ago.

Typically, July and September are the book ends of the quarter and August is relatively small due to vacations and the start of school. As we close in on the rest of July, we do expect the month to finish up, continuing the trends we saw in the June quarter.

With that commentary on our business, I do want to reiterate cautionary advice to watch the industry data carefully and pay particular attention to our core segment. Specifically watch the stern drive and inboard boat segments. In the June quarter, industry stern drive segments were generally down while inboard segments were mixed but generally up.

Those segments have very meaningful dollars for the industry and certainly for us. The industry headlines that are often referred to are sometimes broad and not specific enough to fully understand the impact on us. With that update, I’ll turn the call back over to Bill..

Thank you, Mike. As we enter the second half of summer, our historically busiest selling season, we remain confident that the industry is well on its way to a recovery. Best of all, we are confident that we will continue to outpace the industry as demonstrated with our third quarter results.

The industry recovery is definitely underway and our efforts to capture the pent up demand during our June quarter were effective. We believe as history can confirm we will be successful in overcoming all the challenges we encounter as we continue to make deliberate headway. We continue to capture additional shares.

Our customers’ passion for boating coupled with our increased confidence in the economy is leading to more sales. Our investment’s been stimulating this and additional demand are reflected in the strong results.

We remain focused on the brands that resonate with our customers and believe that we have the appropriate inventory to support the growing demand within our customer base.

We know we are positioned to capture additional market share as new innovations and models become available from our manufacturers, giving our customers even more reasons to trade their aging boats and yachts. Together with our balance sheet and our proven capabilities, our company is situated to generate growth.

With our one-stop solution for all of our customer current and future boating needs, we have all the tools and products necessary to facilitate relationships with our customers for years to come.

With our comprehensive approach and solid well-capped July’s balance sheet, we have a significant competitive advantage in the marketplace and we continue to provide world-class service and products to our current and future customers.

We continue to evaluate potential acquisition opportunities but remain committed to only making them when the evaluation is correct and they make sense for the long term. Lastly, I’d like to recognize and thank our team for their efforts during the quarter and their ongoing commitment to our customers. Their commitment is driving our success.

And with that, Operator, we’d like to open up the call for questions..

Thank you. (Operator Instructions) We’ll take our first question from Jimmy Baker of B. Riley. Please, go ahead, sir..

Hi, good morning. Thanks for taking my questions..

Good morning, Jimmy..

Good morning, Jimmy..

First, on your inventory basically flat year-over-year despite the 22% comp and some of your bullish commentary regarding the backlog up and July trending well.

I know you’re focused on increasing turns but do you feel you have enough inventory to chase that rising demand?.

Jimmy, yes, we feel like we have enough inventory as we commented in the script here that we’re anxiously awaiting the new products from Sea Ray primarily. And so we’ve had to work our way through a lot of the older products that have been around for, in some cases, a bunch of years. And so we’re very encouraged by the new products that are coming.

And as we stated, we’ve been kind of clearing the decks for that new product and that’s the reason we gave up some of the margin. But we feel comfortable with the inventory we have to get us to the point where the new products are here..

And Jimmy, you’re right. I mean, our turns are improving but they’re still lower than the way we traditionally operated. So we’ve got the right level of inventory for the outlook that we see and certainly are watching the uptick that we’ve seen in business and making sure that we’re aligning that with product coming in as well..

And new inventory increases the turns, I mean, as an example. The new products that we have received, like the 350 SLXs that are coming in with Sea Ray and the 65s that we’ve got sold that are beginning to come in and get delivered, that product is on order and it’s going to have a very quick turn.

And so new products sales and I think that’s the long-term strategy that we’ve continued to put a lot of our eggs in the Sea Ray basket and it’s going to pay off because it’s still the number one brand with absolutely the best support that’s out there from a manufacturer..

Okay.

And then separately, can you just speak to the decline in deposits, give us a little more color there and how we should reconcile that with the new product pipeline that’s coming and the backlog that you’re building in some of that New Brunswick product?.

Well, Jimmy, when you’re selling larger products, in a lot of cases, in fact, in most cases, they have trades. And the trade is not recognized as a deposit, even though it is a deposit. So the customer will give us the title to their boat or access so that it becomes our boat at the time they commit to the contract. But it’s not a cash deposit.

And of course, deposits is cash, not trades that are there. And a lot of these larger products, whether it be Azimut or other larger Sea Rays, they have significant trades and that’s part of the deposit from the customer but it’s not showing on the deposit line..

Yes, I think it’s a line that we obviously have to track, we have to have on our balance sheet. It’s real. It’s just – I think we’ve been doing this now for many years.

I think I’ve had the same commentary around it, which is it’s tough to get a good read from it because you can get $1 million deposit on a $2 million boat just based on negotiations and one quarter you can get a $50,000 deposit or let’s say a $100,000 deposit on a similar boat the next year.

I think fundamentally, when you look at the industry data, to start with, industry data is showing that big boats are generally doing better and gaining momentum, which is consistent with what we say. And then the color that we give around the line, I mean, we’re not seeing any issues by product above 40 feet at all.

And that’s what typically drives that line. So to Bill’s point, if we’re – I’ll give you an example. If we’ve got some 65s that are sold that are coming, there may be a small cash deposit but the customer’s out using his trade and boating so that’s not a deposit on our balance sheet yet because he’s waiting on his boat.

But now you take the point where let’s say he actually gives us his trade on June 25th and he takes delivery of his boat on July 5th, I mean, that boat may be valued at $1.5 million, which goes into that deposit line. At that point in time, we take the boat in on trade. So you’ve got to – that’s the best color I can give to you.

I mean, there’s a lot of dollars that go into there, a lot of individual transactions and it’s – last year we had a couple of big deals or actually we had more than that. We had a handful of big deals that were in there from a timing perspective.

But fundamentally, the big boat (inaudible) experience, including in the June quarter and in the September quarter, is projected to be doing fine..

But the real measure is that we have more projected sales coming into July and, at this point in time, than we had a year ago..

Yes, a year ago..

And so that’s the real indicator..

Sure. That’s very helpful. And then last for me and then I’ll pass it off, just hoping you could speak a little bit more on your acquisition pipeline.

Are you getting close to adding any locations and any geographies outside of kind of your current footprint look particularly attractive to you here?.

We’ve been in, I’d say, more active discussions on potential acquisitions in the last few months than we have a year ago, let’s say, and we’re working through some of the details with a few of them right now as far as dealership acquisitions and but it’s got to make sense for us and if it’s acquisitions where the management is staying and the owners are staying, which is what we prefer, you’ve got to make sure it’s a win-win for them, also.

And so as we work our way through that, we’ll keep you appraised of it. I can also tell you that we’re also looking at some opportunities, some property-wise strategic opportunities for the company that are moving along..

Make sense, yes. We’re always in discussions, Jimmy, and we never – back when we gave guidance, we never put acquisitions in our numbers and we’re opportunistic when it comes to completing them. We love the ones that are in close proximity to other locations. You can leverage marketing leverage, management leverage, inventory.

We’re not opposed to doing ones that are not contiguous but – and so if you look at where we’re located at, you can maybe start thinking geographically where we have interest..

Okay. Thanks very much. Nice quarter. Good luck, guys..

Thank you, Jimmy..

And we’ll take our next question from Mike Swartz from SunTrust..

Good morning, guys..

Hey, Mike..

Good morning, Mike..

Hey, just wanted to kind of touch on an issue of your commentary around July. If I just look at the June quarter and what we were given on your last conference call in terms of how April was trending, I kind of back into that May, June were also up nicely in the double digits, maybe mid teens.

Is that the way to think about July or am I missing an extremely tough comp in July or maybe you can provide more color there..

Yes, Mike – Jimmy – and you’re right on your math. I mean, May and June were good. June was actually a little bit better than May. May still had some weather issues. April was strong, May was positive but had some issues and then June was strong.

And our trends in July would be in the line that your math is calculated, be in the mid double digits for July. Keep in mind as I say that, which is decent because we’re up against a quarter that has two decent same-store sales growth numbers the last two years. We’ve still got to produce in August and September.

And the backlog comment that I made also and that I think Bill just eluded to, when we started the July or excuse me, the September quarter, we had more backlog starting the quarter than we did a year ago also, which sort of addresses the earlier question about customer deposits. I mean, that’s why that line can be a little misleading at times..

Okay. No, that’s very helpful. Thank you.

And then just with regards to some of the – you had mentioned on the gross margin side that some of the promotion or price discounting on some of the older models that you’re kind of flushing through the pipeline, could you just maybe talk about where you are in that process, maybe when you expect that drag to kind of alleviate?.

I think, first of all, with our primary supplier, Sea Ray, that’s coming out a lot of new models, most of the models really are hitting us or getting to us in really model year 2015. We’ve got a couple here in model year 2014 but the smaller models are coming out with the larger models, the mid size. That all starts to kind of ramp in the….

September, October..

Yes, September, October and then probably more meaningfully even at the back half of the model year, so we’ll be doing this balance or this walk that you do as new products coming in and old products leaving, which is no different than what we do every single day. It’s just a lot of it right now with our primary – our largest supplier.

The difference, though, in the future versus the June quarter that I see is in the future we’re actually going to have the new models to sell, which will help offset maybe some of the discounting we’re doing on the older models, whereas in the June quarter, we largely didn’t have the new models to sell. They just weren’t out yet.

We’re kind of getting ready for them coming and so when I look at 2015 and think about our margin opportunities, I think we have the ability to have the annual margin growth because of the mix of the incoming product and not just the outgoing product..

And we’ve seen an increase in both margin, especially since we started our one price approach to selling. And we had to give up some of that margin. We didn’t get away from our one price selling. We just lowered the one price, understanding that also Sea Ray was in there helping us with our margins would have even been lower.

And so but the real opportunity here is the new product as it comes and they’ve been a little slow in doing it but the product is dead on what we need and it’s going to be a game changer in a lot of cases and get a lot of these customers wanting to trade even more.

So we’ve got more (outboards) coming, we’ve got new stern drives coming and we’ve got new inboards coming. And so we’re excited about the future. We just wish it was a little sooner and we’re disappointed that we couldn’t have held the margins up a little higher. But we’ve got to also clear the decks and get this older product out of here.

It’s still a wonderful product but it’s not the new..

New stuff’s coming..

And new sells..

So just to maybe refine all of that great commentary, I mean, is that to say that revenue and margins would have actually been better if you had had the new product to sell?.

Oh, absolutely. That’s not even – I mean, that’s an understatement. If we’d have had new products – if we’d have had them two years ago, the company would entirely look different today.

But we made a conscientious decision to stick with the number one brand in the world called Sea Ray and new products take time to do and the decisions to not invest in new product that were made years back, we’ve had to pay the price of that. But that being said, we’re going to all get the rewards when we do get the new products.

And a perfect example is the 350 SLX and you’ve heard us say before, first of all, we’re getting incredible margins on the product. It’s in demand. We, as a company, have probably over 60 of them sold and we’ve only received maybe 20. And so you don’t have to give up margins. The customers love them and they’re still buying them and there’s no issues.

Well, we’re getting that way. We’ve got new products coming and 19, 21 footers, 27 footers and so a lot of them 45 footers and 39 footers and 65s.

We’ve got them presold way out and so that being said, as we get the new products from our primary brand called Sea Ray, life for us will sure be a lot more fun and these calls will be a heck of a lot more fun, too..

Great, thanks for the color, guys..

Thank you, Mike..

Thanks..

(Operator Instructions) We’ll take our next question from Andrew Grone from Dougherty & Company. Please go ahead, sir..

Hi, guys. Good morning..

Hi, Andrew..

Good morning.

How are you?.

Good, thank you.

How are you guys?.

Good..

Just looking at the variability of SG&A expenses, so they came in a little bit lower than where we were modeled.

How should we think about expenses as a percent of revenues for the September quarter? Any changes in the expense structure?.

No. I think on the last earnings call I mentioned that the way to think about what happens to our expenses, as revenue grows, let’s say it grows $100 million. Typically 15% or more drops to the bottom line, the pre-tax line and then 10% gets hung up in expenses. That 10% drops as revenue really ramps up and you get more leverage in the business.

I think with the 22% growth that we had in the top line, we did obtain more leverage. We did also have, if you guys remember the June quarter last year, we cited a few unusual expense items associated with Hurricane Sandy. I think there was $350,000 we cited, health insurance of maybe $0.5 million.

And while the health insurance is still not trending exactly where we want it to be, we did not have the Sandy expense, which helped get leverage and just did a better job or had better leverage in the business.

In the September quarter, don’t forget we have, I think it’s $4.7 million or $4.8 million of BP recovery again that reduced last year’s SG&A and so I think depending on how you’re modeling revenue, if you’re modeling revenue to increase by X dollars, roughly 10% of that is reasonably expected to increase expenses, maybe a little less but that’s kind of the way to think about it..

Okay, great. That’s helpful, thank you. So obviously weather impact was the major focus on the last call. You’ve highlighted a couple regions, New Jersey, Florida, that were strong in recovery this quarter.

Are there any specific regions you feel have yet to fully recover or maybe were impacted by some other weather-related factors? So I know, as an example, the Minnesota market excessive rain has led to pretty high water levels and no lake restrictions on most of the major lakes up here, so not great boating conditions.

Have you seen anything like that in regions that have affected your guys’ sales?.

That’s been the biggest one. As you’ve just stated, it’s idle only on Lake (Minetaka) and a lot of the lakes up there. And so they’re very tough to keep the excitement level up when you could only run at idle speed. But other than that, it’s recovering most everywhere else.

As the weather got there, albeit we had a very, very light spring in a lot of our northern markets and like Ohio and even Missouri and panhandle of Florida which is usually very active during the late winter and early spring months, a lot of rain and just bad weather and which it did impact us some there.

But that being behind us, they’re very busy right now and things are – people are out boating..

Do you feel like for a Minnesota market, for example, is it too late in the summer for a recovery even if lake restrictions – I believe on Lake (Minetaka) are expected to be lifted this weekend? Do you feel it’s still maybe a little bit too late in the summer?.

Well, it impacted the business for the year for sure. Will there be a chance for some of the recovery to try to get back on track up there? I think if it is lifted in the next week, the odds sure get a lot better than if it’s another two to three weeks, so..

Andrew, we’d encourage you and Greg and all your other associates to visit our (Rodger) store just to help out with that..

We’ll do our best. Thanks, guys. Appreciate it..

Thank you..

That does conclude today’s question-and-answer session. Mr. McGill, at this time, I’d like to turn the conference back to you for closing remarks..

Thank you, Operator. And in closing, I’d like to thank all of you for your continued interest and support of MarineMax. Mike and I are available today if you have any additional questions, so thank you..

And as a reminder to our phone audience, that does conclude today’s conference. We appreciate your participation..