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Edited Transcript of HZO earnings conference call or presentation 25-Apr-19 2:00pm GMT

Q2 2019 MarineMax Inc Earnings Call

Clearwater May 1, 2019 (Thomson StreetEvents) -- Edited Transcript of MarineMax Inc earnings conference call or presentation Thursday, April 25, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Michael H. McLamb

MarineMax, Inc. - Executive VP, CFO, Secretary & Director

* William Brett McGill

MarineMax, Inc. - President & CEO

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Conference Call Participants

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* Brandon Rolle

Northcoast Research Partners, LLC - Senior Research Analyst

* David Sutherland MacGregor

Longbow Research LLC - CEO and Senior Analyst

* Eric Christian Wold

B. Riley FBR, Inc., Research Division - Senior Equity Analyst

* Frederick Charles Wightman

Citigroup Inc, Research Division - Assistant VP & Analyst

* James Lloyd Hardiman

Wedbush Securities Inc., Research Division - MD of Equity Research

* Joseph Nicholas Altobello

Raymond James & Associates, Inc., Research Division - MD & Senior Analyst

* Michael Arlington Swartz

SunTrust Robinson Humphrey, Inc., Research Division - Senior Analyst

* Brad D. Cohen

ICR, LLC - Managing Partner

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Presentation

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Operator [1]

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Good morning, and welcome to the MarineMax, Inc. 2019 Fiscal Second Quarter Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Brad Cohen, Investor Relations for MarineMax. Please go ahead, sir.

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Brad D. Cohen, ICR, LLC - Managing Partner [2]

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Thank you, operator. Good morning, everyone, and thank you for joining this discussion of MarineMax' 2019 second quarter. 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 would now 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, let me turn the call over to Mr. Mike McLamb. Michael?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [3]

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Thank you, Brett. 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.

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William Brett McGill, MarineMax, Inc. - President & CEO [4]

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Thank you, Mike. And good morning, everybody. I want to start out by saying how proud I am of our team's ability to produce 12% same-store sales growth, in a quarter in which the industry clearly had its challenges. The industry data for the month of March combined with the choppy data throughout the quarter is evident that less-than-optimal trends prevailed. To generate the top line growth in such an environment required us to be proactive and to invest more in boat shows and in marketing, which drove sales, but at a cost. While the industry did not seem to be in a discounting mode, we were incrementally more aggressive, which did impact our consolidated gross margin. Additionally, the last push of the Sea Ray larger boats also weighed on margin and expenses in the quarter.

Let me give some additional color on business in the quarter. As we said in our earnings call in January, boat shows started off choppy, but were gaining strength as the months progressed. As it turns out, boat shows were a bright spot for MarineMax as just about every show is meaningfully up in contracts written and dollars. Part of this is due to our strategy to invest greater in shows after we saw the choppiness in December quarter and January. We started to -- what started to become evident at our stores through the February industry data was that lower price point boats such as smaller aluminum and center console fishing boats were soft. This became a trend through March and was reflected in the industry data.

Many in the industry have commented that weather likely was the biggest culprit. For us, I would add that given our geographic diversity, our trends are inconsistent. So while weather is a factor, we are watching trends carefully as we work through the coming quarters.

We did well producing top line growth, but our revenue was below our expectation, meaning we incurred costs and invested for greater growth than was achieved. Overall, units in the quarter were down for the industry in the categories that we sell, and our units were also down on apples-to-apples basis. The good news is that generally, premium products performed well in the quarter, which explains a lot of the growth in our average unit selling price. Larger boats, those that were 40 feet, were also generally strong as we saw an increase in units and dollars. The trends towards outboards and the demand for outboards from consumers remained a theme in the industry. Our manufacturing partners continue to invest and launch new models of outboard power that are being very well received.

Another positive note is that our strategy of completely replacing the discontinued Sea Ray larger boat revenue with brands we carry like Azimut, Galeon has been executed near flawlessly through the first 3 quarters since the Sea Ray announcement in June 2018.

To drive the replacement revenue and achieve growth, we did have to invest in more training, marketing and boat shows, which added additional costs in the March quarter. At the end of the March quarter, we had only 2 larger Sea Rays in stock. Obviously, each quarter since the announcement saw a meaningful drop in revenue from the larger Sea Ray, which has been more than made up by our successful integration and growth of other brands.

Beyond boats, we once again drove growth in our higher-margin businesses that include finance and insurance, service and parts, storage and our charter operation. This is a key strategic initiative, and our efforts to train our teams and to ensure they are included in sales processes continues to produce incremental increases. However, despite the improvements with such strong same-store sales growth in the quarter, which is driven primarily by boat sale, the higher-margin businesses can't keep pace and shrank as a percentage of our total revenue, which deflated consolidated margin.

There's no question the MarineMax team is the best in the industry, and I want to thank our team for their tireless effort. I'm proud of them for persevering through the choppiness that the industry has seen. Consider that despite the Sea Ray discontinuing product, which historically was a meaningful portion of our revenue, combined with the choppiness in the December and March quarters, our team has averaged almost 12% same-store sales growth over the last 3 quarters since the Sea Ray announcement. In addition, relative to the marine industry or almost any other consumer-related product, our same-store sales growth is very strong.

While I gave several reasons above for our margin expense challenges in the quarter, we are digging in and we're doing our operations to be sure our cost structure, pricing and operations are aligned with business today and in the future. As we look ahead, we have the right inventory. Our manufacturers continue to deliver innovative products loaded with new technology and marked by fresh design.

With a strong backlog and an enthusiastic team, we are entering what is historically our largest quarter. All of our stores are speaking with customers and working to unlock some of the potential pent-up demand from the long winter season. We will utilize unique MarineMax event to drive sale and exceed customer expectations. We will continue to source the right product and secure it for our stores, provide outstanding service and ensure our customers are enjoying time in the water with their family and friends. Given our ongoing gains in market share, it's great to see our differentiated approach is resonating with the consumer.

Externally, we will pursue opportunities for growth, which includes acquiring great dealers and bringing them into the MarineMax family, and strategic real estate acquisition, specifically marinas that can help drive our overall business more effectively.

To that point, last week, it was great to announce the acquisition of Sail & Ski Center in the growing markets of Austin and San Antonio, Texas. Sail & Ski Centers has a long and successful operating history, having been founded in 1969 by the late industry icon, Rob Malone. They were recognized as the best dealer in North America by boating magazine, ranking up the top 100 dealers in 2010 and then again in 2018. The team of Sail & Ski is now led by 2 well-respected industry veterans, Buzz Watkins and Doug Malone. The brands they carry are generally aligned with ours, which allows us to leverage inventory, training and marketing. We believe that combining best practices, especially in the towboat market and the parts and accessories area, while providing them access to other products that we carry, will drive growth for MarineMax overall. It's really great to be able to welcome the Sail & Ski team to MarineMax.

With that update, I'll ask Mike to provide more detailed comments on the quarter.

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [5]

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Thank you, Brett. Good morning, everyone. Let me also thank our team for the growth they generated in the quarter.

For the quarter, revenue grew over 12% to $304 million driven by strong 12% same-store sales growth. As Brett mentioned, choppiness in the industry resulted in lower unit sales in several of the key categories that are important to us. For the quarter, our comparable unit sales were down in the low mid-single digits, which means all of our same-store sales growth was driven by a large increase in our average unit selling price. The growth in premium and larger product in the quarter helped to drive up our ADP. Based on industry data as Brett touched on, we believe we again gained market share in the quarter.

Our gross margin was up 120 basis points. The decline in margins was roughly half due to product margins and the rest due to mix of revenue. Specifically in regards to mix, increased boat sales, which carry a lower margins than our higher-margin businesses impacted consolidated margins. This quarter also saw a pickup in larger product and incrementally in used product, both of which traditionally carry a lower margin than other products we sell. But out of the product margin decline, about half was directly related to the Sea Ray larger product.

Selling, general and administrative expenses were up to $64 million. As Brett discussed, given the choppy data coupled with increasingly improving boat shows, we took a proactive approach to try and stimulate additional sales and increased our promotional efforts. I would add that the timing of one of larger shows, Palm Beach, contributed to the lack of leverage in the quarter. The show moved to very late March, which resulted in 100% of the costs hitting in the quarter with no ability to recognize any revenue. The show was a strong show and partly explains the increase in our customer deposit line.

Also as I mentioned last quarter, our charter business is fully operational this year as opposed to virtually shut down in the March quarter last year due to Hurricane Irma. This added upwards of about $1 million of costs to the year-over-year expense increase. While this was budgeted and expected, this did incrementally impact the year-over-year expenses.

For the quarter, interest expense increased slightly due to borrowings from additional inventory levels.

Our pretax earnings were $7.2 million compared to $7.8 million last year. Our net income was $5.3 million, with earnings per diluted share of $0.23 compared to an adjusted $0.25 last year.

Turning to our balance sheet at quarter end, we had about $64 million in cash. But as a reminder, we have substantial cash in the form of unlevered inventory. Our inventory levels at quarter end were up 7% to $455 million, which is in line with our year-to-date same-store sales growth. The aging and mix of our inventory is healthy as we head into the busy summer selling season.

Looking at our liabilities. Our short-term borrowings were down slightly to about $298 million due to our enhanced cash and liquidity position. Customer deposits were not the best predictor of near-term sales because they can be lumpy due to the size of deposits so whether a trade is involved or not, we're up 67% from last year. As we've mentioned, larger product strength and the timing of the Palm Beach boat show contributed to this growth.

Our current ratio stands at 1.51 and our total liabilities to tangible net worth ratio is 1.12. Both of these are outstanding balance sheet metrics. Our tangible net worth again marked a new record of $341 million or $14.55 per share. We own about half of our locations, which are all debt-free, and we have no additional long-term debt. Our balance sheet has a formable strategic advantage that allows us to capitalize on opportunities as they arise.

Let me now discuss our annual guidance. Given the challenges seen by the industry and the company in the March quarter, we believe it is prudent to align expectations. As such, we are adjusting fiscal 2019 earnings per share guidance to $1.75 to $1.85, from $1.85 to $1.95. Our guidance takes into account that we're up against the solid 3-year stacked same-store sales growth of about 37%, and factors in Sail & Ski should add roughly 60% of its annual $40 million in revenue over the next 2 quarters and approximately $0.04 to $0.05 in earnings per share.

Our guidance now assumes we'll grow same-store sales 5% to 8% on an annual basis. We believe this is prudent until we see if the choppiness continues or if industry trends improve going forward for our key categories. Additionally as a reminder, the back half of 2018 is an overall tougher comparison than the front half.

Our leverage so far this year has not been at levels we target, so our revised guidance does assume leverage in the second half in the mid- to high single digits.

Our guidance uses a share count of around 23.5 million diluted shares. It also uses an expected 2019 tax rate of 27% and excludes the impact from other potential acquisitions we may complete.

As for current trends, Brett mentioned we have a strong backlog. With roughly a week to go in April, we do expect to have positive same-store sales in dollars and units. However, we need to successfully produce similar results in the more meaningful months of May and June.

With those comments, I'll turn it back over -- call back over to Brett for some closing comments. Brett?

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William Brett McGill, MarineMax, Inc. - President & CEO [6]

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Thank you, Mike. As we move forward, our team is motivated and hard at work to improve our performance as we move into the second half of the fiscal year. We will also continue to pursue and evaluate the many opportunities to grow the business for the long term beyond the recent expansion in Texas. Internally as we have spoken throughout the call, we are already acting on initiatives to improve our leverage including execution of our digital strategy to increase efficiency, better alignment of expenses and continue to expand the reach of our higher-margin businesses. Boating is a great aspirational activity, and our differentiated customer approach ensures MarineMax is the best choice for meeting the needs of boating this year.

And with that, operator, let's open up the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And first we'll go to Greg Badishkanian with Citi.

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Frederick Charles Wightman, Citigroup Inc, Research Division - Assistant VP & Analyst [2]

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It's actually Fred Wightman on for Greg. If we just look at the margin performance in the quarter, it looks like you're a little bit earlier than some of your competitors in terms if laying in promo activities. So can you just talk about if you're seeing any competitive response in the industry as far as people getting more aggressive promotion?

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William Brett McGill, MarineMax, Inc. - President & CEO [3]

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I think as we said, we were aggressive with going to market to drive the sales. So I don't know if we really looked out. We haven't seen a lot of real heavy discounting yet, but we were aggressive with our promotion and pricing. But we haven't noticed it, spread throughout the different shows and events we're looking at.

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [4]

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And our pricing is a very incremental, it wasn't drastic as the environment did not seem like it call for it, Fred.

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Frederick Charles Wightman, Citigroup Inc, Research Division - Assistant VP & Analyst [5]

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Okay. That makes sense. And then if you can sort of take a step back and look at the soft industry performance that you've seen in the last 2 quarters, I mean, called out some weather here in this quarter, which makes sense. But what you think is driving industry level slowdown?

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William Brett McGill, MarineMax, Inc. - President & CEO [6]

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I think that, you know, as all the reports come out and say, these are some of the smaller quarters or months that we look at, and weather is always a factor in there, but it's kind of our caution that we're kind of just looking at it and seeing that these are the premium products that we sell continue to have great cadence. Our events, customers, -- our events are fully booked where people coming out to these things. So we're -- we see good things, but we're not sure on maybe the smaller and/or more value-oriented product.

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [7]

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I think most people say, Fred that the December quarter choppiness, a lot of people believe that was due to all the turmoil in the markets and political factors and all the stuff -- tariffs that was going on back then. And then all the reports, to Brett's point, are more weather related. We're just -- we're being a little cautionary until we see it get into our season in terms of how our guidance was -- reflects it.

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Frederick Charles Wightman, Citigroup Inc, Research Division - Assistant VP & Analyst [8]

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That makes sense. And just finally. At this point in the year, do you guys typically assume that any weather-related impacts are really deferrals at this point versus cancellation?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [9]

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Historically, no, we said it.

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William Brett McGill, MarineMax, Inc. - President & CEO [10]

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Yes, yes. It's early in the season. It takes bad weather all the way through the end of June, to really miss the season.

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Operator [11]

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Next, we'll go to Joe Altobello with Raymond James.

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Joseph Nicholas Altobello, Raymond James & Associates, Inc., Research Division - MD & Senior Analyst [12]

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I guess this was already covered. I'll talk about weather. I'll start there. You did mention that weather probably impacted the quarter, we put it up for the company, so far this earning season. But I'm curious, if you look at your comps and your margins in markets where weather wasn't an issue, was there a noticeable difference between in some of your Southern and Northern markets?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [13]

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I will tell you Joe, it's mixed. It's inconsistent, I think, it's the phrase that Brett had in his prepared remarks, which is what I would say and which also causes a little bit of hesitation, causes us to let's see how April is, we'll watch the industry data to see how we're doing. Obviously, it looks like we're going to have a good April. Get into the more meaningful months of May and June, but it's inconsistent. And I think when we talk to dealers and others in the industry, they kind of say the same thing. But while we're all looking at the weather, I think it's something more of a, "Let's get into the season and see what's really happening out here."

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Joseph Nicholas Altobello, Raymond James & Associates, Inc., Research Division - MD & Senior Analyst [14]

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Okay. In terms of the guidance, I guess, you brought it down on an organic basis, 15%, right, if the acquisition had started back home. So just want to understand what's baked into that. I imagine, there's no additional impact in Sea Ray, right. You have a couple of boats left -- boat show season is winding down. I imagine the advertising and marketing related to those should go away. It probably includes some negative impact for mix going forward as well. And I guess maybe the last piece would be what kind of investments in marketing generally are you interested going forward? Do those come down from Q2 levels? Or do they stay elevated in the second half?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [15]

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So if you listen to what I said, Joe, about the leverage at the mid- to high single digit, that would imply that we're going to continue to be somewhat promotional. Until we get into it and see, that's how the guidance is calculated. If we get into it and let's say, it's all weather, we don't need to do that, then our leverage should ramp back up and our earnings per share will ramp back up, and we'll be very happy as we go to the summertime. But sitting here as we ended March, looking at the data, we're using less-than-optimal leverage, which would tell you that maybe a little bit on margins, a little bit higher on promotional activities.

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William Brett McGill, MarineMax, Inc. - President & CEO [16]

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And I think working through the Sea Ray product, moving the product but yet continuing to keep customers in our family and put them in the other products we carry, it does take an enormous effort. So it's not just about the inventory, it's about getting these customers on events and get away with marketing and getting them to move into these other products that we carry. They historically lost Sea Ray.

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Joseph Nicholas Altobello, Raymond James & Associates, Inc., Research Division - MD & Senior Analyst [17]

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Okay. Just lastly, how much did Palm Beach cost you in the quarter?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [18]

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I don't have the rate in front of me, but I'm sure that it has got to be closer to $0.5 million.

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Operator [19]

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Moving on. We'll go to Eric Wold with the B. Riley FBR.

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Eric Christian Wold, B. Riley FBR, Inc., Research Division - Senior Equity Analyst [20]

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A couple of questions. Just one, kind of going back to kind of decision to start promoting heavier in the quarter. You weren't seeing it really from a competitive standpoint. What initially drove the decision to kind of drive more sales or kind of I don't say lower margin product, but obviously you taken a hit on. But what was the impedence kind of started that earlier than what you may see from competition?

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William Brett McGill, MarineMax, Inc. - President & CEO [21]

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I think you know our -- obviously the December quarter data was kind of extremely choppy, I guess, I'd say. So that caused us to say, let's put the pedal on in these boat shows. And I think we saw the boat shows growing, so we said let's keep at it. And maybe we're in the showrooms, we weren't seeing the activity we though. We put on heavier at the boat shows and had good results from it.

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Eric Christian Wold, B. Riley FBR, Inc., Research Division - Senior Equity Analyst [22]

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Okay. And then, lastly, I wanted to see, and focusing a lot more on kind of the comments around the lower-priced boats. Obviously, we've heard that weather's well. I guess, you guys -- seems like you have pushed back a little bit on weather being the sole impact there, kind of around, maybe those being somewhat more impulse purchases and weather impacting, et cetera. I guess, you get a sense that it is really lower income customers being pressured by something waiting for taxes to be done? Maybe kind of what do you hear maybe from the boat show season, from your dealer, that could be part of your store level in terms of, what's driving that, the delay in making a decision not to buy a lower-priced boat?

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William Brett McGill, MarineMax, Inc. - President & CEO [23]

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Yes, I think kind of like we said, we saw inconsistencies on whether we could say it was weather or not. So there's just -- there was something there, trends we saw just like the industry data reported that we couldn't just say, yes that was because of weather. So there's something else out there, we're not sure what that is.

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [24]

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We're not hearing concerns from customers. The customers we're talking about are out here looking for a boat to enjoy the boating lifestyle, is the one that you're not hearing from. It's what seems to be causing some of the issue.

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Operator [25]

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Next, we'll go to Michael Swartz with SunTrust.

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Michael Arlington Swartz, SunTrust Robinson Humphrey, Inc., Research Division - Senior Analyst [26]

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Just wanted to follow up on Eric Wold's question about maybe what's driving the softness or slowdown in demand for some of the maybe aluminum or smaller fiberglass product. I mean is there any sense that you have that maybe some of the raw material pass-through and just price increases, in general, are starting to maybe dent demand at the margin a little bit?

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William Brett McGill, MarineMax, Inc. - President & CEO [27]

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I don't know it if we could speak exactly to that. I just think it's -- our boat show traffic, it was in a -- it was all the reasons we're not buying this boat. We didn't quite see the buyers heavily in the shows as we had maybe in the past.

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [28]

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I think you bring up a good point, though. I mean clearly, this year has probably had a greater price increases than any recent year. But that's across the board whether it's lower price points boats or not. I think the industry and all of us need to be as sensitive to as possible. But it's just inconclusive, I guess, what I will say, Mike.

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Michael Arlington Swartz, SunTrust Robinson Humphrey, Inc., Research Division - Senior Analyst [29]

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Okay. That's fine. And just on -- I think you said, Mike, half of the decline in product margin which I think would work out to about 30 basis points to the gross margin decline year-over-year came from just clearing out some of that larger Sea Ray product. So, I guess, I'm just trying to understand, maybe I'm misunderstanding this, but is that entirely due to just pricing and promotion trying to get it off the lots? Or was that also embedding the cost related to the education and some of the customer-facing initiatives to get people into maybe other boats, like Galeon or Azimut or whatever?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [30]

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Great point and thanks for the clarifying question. But my comment was specific to the margin decline from selling the final Sea Rays that we had after the December quarter. Up until the December quarter, we were holding our own from a margin perspective. They were down some, but this quarter, they definitely dropped. All the comments that Brett made about the training that we're doing, promoting and all that's down in SG&A. So the 30 basis points is just margin decline specific to the Sea Ray larger product.

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Michael Arlington Swartz, SunTrust Robinson Humphrey, Inc., Research Division - Senior Analyst [31]

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So theoretically as you're now down to 1 or maybe 0 of larger Sea Ray, that kind of 30 basis point impact would go away?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [32]

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That's correct.

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Operator [33]

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We'll next hear from James Hardiman with Wedbush Securities.

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James Lloyd Hardiman, Wedbush Securities Inc., Research Division - MD of Equity Research [34]

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So I just want to make sure I'm clear. The -- I mean the same-store sales were better, at least than what we were modeling. I think they were better than The Street. But it sounds like what you're saying is that they fell short of your expectation. I just want to make sure I understand that properly. I mean obviously, it was a pretty tough comparison here in the second quarter. And then just maybe given that it seems like maybe we were off, anyway that we should think about sort of phasing of same-store sales during the back half of the year?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [35]

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Yes, I can comment that with the success of the boat shows of January and February and us putting the pedal to the metal, we're sitting there looking at the biggest month March about ready to begin, we thought we will be able to drive business than we did. And we ended up having a, there's a decent March, but we as a team thought we'll even drive a bigger March than we did. So that's that comment on how we thought the quarter even be bigger than it was. And your comment on same-store sales, if you look at 2018, this is going from memory now, but the front half of the year in '18, I think averaged 7% growth, if my memory's right, and the back half was 15% growth. So we're simply just up against a tougher comparison on a 1-year basis. You can start looking at 2-year same-store sales trends, 3-year same-store sales trends. And granted, we have some fairly erratic same-store sales trend. But the back half of '19 is a tougher comparison than the front half was and were at 7% through March.

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William Brett McGill, MarineMax, Inc. - President & CEO [36]

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And the timing of boats between quarters can be very difficult, especially on the bigger products. So we see some backlog and we can see different things, but the timing of big events is critical.

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James Lloyd Hardiman, Wedbush Securities Inc., Research Division - MD of Equity Research [37]

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Great. And then maybe just a bigger picture question about the strategy, the kind of utilization of promotional dollars, is the goal in any given quarter to optimize or maximize earnings power? Or there are other considerations that play here? Maybe there are benefits to taking market share even in a quarter where that strategy might hurt earnings ultimately. I didn't know if any of that is going on, but it does seem like, you know in a pretty -- if a top line quarter, that these margin issues continue to crop up.

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William Brett McGill, MarineMax, Inc. - President & CEO [38]

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We have to look at every single factor as each day and months progresses, everything from the inventory levels, competitive pressures. Like I'll say, we got to take customers that for years that bought Sea Rays from us, and now we have to transition them to other product, you take trades. There's just those decisions you have to make to drive the business in a different direction. Obviously, we always have an eye on all of our earnings, but inventory levels and competitive pressures, you measure that and you work through with.

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [39]

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And we certainly always would rather get a customer and take market share, given how our life cycle of customers over several boats and future earning streams ultimately it ends up planting seeds for future growth even. So we've always tended to lean that way, James, over all the years. And because of the seasonal business, you got to do your -- you got to put your best foot forward out there, almost always. As you're trying to balance inventory management, orders coming in for manufacturers, all of that. And we -- our team is out there everyday trying to create the business. And again as we went into March, we did think we were going to have even more business than we did. And some of that perhaps is going to be delayed in coming in April and May, but there's a lot of factors that come into play.

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James Lloyd Hardiman, Wedbush Securities Inc., Research Division - MD of Equity Research [40]

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But just to be clear, the March -- the thinking you would have more business in March was after you decided to step up sort of the promotional support? That's the way to think about that?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [41]

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And then we were also promotional in March, exactly.

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James Lloyd Hardiman, Wedbush Securities Inc., Research Division - MD of Equity Research [42]

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Right. That's I'm saying, yes. So that wasn't -- it wasn't necessarily that the quarter came in worse than you initially expected. But given the promotional support that you'd provided, you would have expected to do even better?

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William Brett McGill, MarineMax, Inc. - President & CEO [43]

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Well, yes. That in addition to being that we were having momentum with these promotional dollars throughout the shows, we did the same -- have the same strategy in our Palm Beach show, which was right at the very end of March. So we thought it was a good show.

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [44]

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Right.

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James Lloyd Hardiman, Wedbush Securities Inc., Research Division - MD of Equity Research [45]

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Got It. And then just lastly, you got a double-digit average selling price benefit in the quarter. How should we think about that going forward? Is that remotely sustainable? How are you factoring that into the same-store sales guidance?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [46]

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Yes. So our guidance for the back half of the year would assume that the industry isn't negative. The -- as far as it was in the March quarter, but it gets back closer to where the outlook is for calendar 2019, which is in the low single digits. And so the rest of our growth there would be a more normalized average unit selling price increase.

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Operator [47]

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Moving on, we'll go to Brandon Rolle with Northcoast Research.

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Brandon Rolle, Northcoast Research Partners, LLC - Senior Research Analyst [48]

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I just had a quick question on the new versus used dynamic. You said you started to see it pick up in used boat sales this quarter. Could you talk about current inventories right now for new versus used in the channel?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [49]

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I'd tell you, I saw in the channel, I think late model-used boats are hard to come by. And margins on used generally are -- but they've been improving. As far as our inventory, we're in good shape in terms of the mix of new versus used.

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William Brett McGill, MarineMax, Inc. - President & CEO [50]

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Yes.

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Operator [51]

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Our final question will come from David MacGregor with Longbow Research.

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David Sutherland MacGregor, Longbow Research LLC - CEO and Senior Analyst [52]

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Just to camp on the used boats for a moment, what were used boats up year-over-year?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [53]

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For us in the March quarter?

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David Sutherland MacGregor, Longbow Research LLC - CEO and Senior Analyst [54]

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For you, yes.

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [55]

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I don't have the exact percentage in front of me, David. I think I commented on the call there is incremental greater growth. And when that -- when used boats grow like that because they're lower margin, it has a mixed impact on our overall consolidated margins, which is why we added up.

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David Sutherland MacGregor, Longbow Research LLC - CEO and Senior Analyst [56]

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Okay. Then on ASPs, the double-digit growth, just how do we think about sticker increases versus mix benefit in that number?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [57]

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It's almost all mix benefit. There has been obviously in place there increases this year, but the bulk of it is because we're selling larger premium product and just content that's on the product.

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Operator [58]

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I'll turn it back over to Mr. McGill for closing comments.

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William Brett McGill, MarineMax, Inc. - President & CEO [59]

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All right. Thank you. Thank you all for joining. With the summer approaching, we hope you're able to get on the water and enjoy some boating. Both Mike and I are available all day today. So please reach out anytime with any questions. We look forward to updating you on our progress on the next call.

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Operator [60]

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And that does conclude today's conference. We'd like to thank everyone for their participation. You may now disconnect.