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Edited Transcript of HZO earnings conference call or presentation 29-Oct-19 2:00pm GMT

Q4 2019 MarineMax Inc Earnings Call

Clearwater Nov 14, 2019 (Thomson StreetEvents) -- Edited Transcript of MarineMax Inc earnings conference call or presentation Tuesday, October 29, 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 & Director

* Brad D. Cohen

ICR, LLC - Managing Partner

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Conference Call Participants

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* Colton West

Longbow Research, LLC - Associate Equity 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

* Scott Lewis Stember

CL King & Associates, Inc., Research Division - Senior VP & Senior Research Analyst

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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 Fourth Quarter and Year-End 2019 Conference Call. Today's conference call is being recorded.

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

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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's fiscal fourth quarter and year-end 2019 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 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 the year and then be available for your questions.

With that, let me turn the call over to Mr. Mike McLamb. Mike?

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

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Thank you, Brad. Good morning, everyone, and thank you for joining this call.

Before I turn the call over to Brett, I'd like to tell you that certain of our comments are forward-looking statements as defined by the Private Securities Litigation Reform Act. These statements involve risks and uncertainties that could cause actual results to differ materially from expectations. These risks include but are not limited to the impact of seasonality and weather, general economic conditions and the level of consumer spending, the company's ability to capitalize on opportunities or grow its market share and numerous other factors identified in our Form 10-K and other filings with the Securities and Exchange Commission.

With that in mind, I'd like to turn the call over to Brett. Brett?

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

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Thank you, Mike, and good morning, everyone.

Yes, let me start by thanking the MarineMax team for their hard work and perseverance, which allowed us to finish fiscal 2019 with improved unit trends and solid results. Keep in mind, 2019 was the first full fiscal year that we had to replace over $100 million of lost business from the discontinuance of Sea Ray's sport yachts and yachts. To post positive same-store sales growth, especially given the industry challenges, shows the strength of MarineMax and our outstanding team. The industry challenges were widely reported and illustrated by the registration data. Seemingly, the political uncertainty, global trade wars and weather all were factors in the softer-than-expected unit sales for the industry. The year started with expectations for unit growth in the mid-single-digit. And through 9 months, the industry was negative 4%. It does seem, however, that the industry found stability as we closed our fiscal year.

Specifically, we finished with very strong unit growth that allowed the entire fourth quarter to be up about 7% in terms of unit, with some brands and segments above that. While our same-store sales declined in the quarter, it wasn't based on unit. Rather, it was due to the timing of sales of much larger yachts. I would add that we did have a material boat show get moved out of the quarter because of Hurricane Dorian. The Tampa show, which is usually held in September and typically produces meaningful revenue for the quarter, was pushed into our December quarter.

During the quarter we saw healthy product margins and did not experience heavy discounting. In addition, we also were able to incrementally grow many of our higher-margin businesses, which helped our consolidated margin. Clearly, a boost to our gross profit was the early July merger we completed with Fraser Yachts. Fraser is a premier superyacht services company that provides brokerage, charter, charter management, yacht management and crew placement services to yacht owners around the world. Their 2 largest operations are located in Monaco and Fort Lauderdale. This acquisition allows us to expand our international capabilities and geographic reach, enabling us to unlock other future opportunities. The nature of their revenue produces very high gross margin, and the September quarter is usually their strongest quarter.

While their overall size is not currently material to our consolidated results, we now believe even more synergies exist between the 2 organizations. And we believe there's meaningful growth in the Fraser business to build upon while also benefiting our store operation. Needless to say, we are excited to have their team on board.

We also had positive contribution from the Sail & Ski acquisition we completed earlier in the year, which increased our presence in Texas, specifically in the fast-growing markets of Austin and San Antonio. The integration has been very smooth, and we are glad to have them as part of the MarineMax family.

As for SG&A, comparable expenses in absolute dollars would be down year-over-year absent the 2 mergers we did, with the bulk of that dollar increase coming from Fraser. Having said that and as we suggested on our last call, we planned to ramp up our cost-cutting effort during the September quarter to better align costs with the industry condition.

To this point, we undertook a thorough analysis of the business in each of our locations. We determined that we can effectively optimize our store base by eliminating overlapping location in the same market where a larger flagship store can meet the customers' needs without affecting revenue or cash flow. We will also save operating and personnel costs while preserving our presence in the market. Through this analysis, we closed 8 locations, which were mostly smaller locations. Our success in the market after this reduction in physical location is partly enabled through our digital strategy, which I'll touch on more later. With today's technology and consumers' behavior online, having multiple overlapping locations in one market is much less critical.

As for inventory, we ended the year with elevated inventory. We have been working with all of our manufacturing partners through the industry softness to reduce orders. As we look at 2020, our reduced orders will allow our inventory to come down to levels in line with current conditions and expectations. I would note, the aging and mix of our inventory is healthy. We generally do not think we will see heavy margin pressure given the lack of it today, but it is prudent to expect that we will be incrementally more promotional to help ensure the success of our inventory management initiative.

Another area I'd like to touch on is the significant investment and focus in our digital customer experience. We utilize leading digital solutions to drive new business and create exceptional engagement, supporting our mission to exceed our customers' greatest expectations. Our existing and future customers are continually informed of our offering, including recurring maintenance and service business opportunity, through our strategic and targeted digital marketing capability. By leveraging the wealth of information from our business operations using data analytics, we are creating a competitive advantage in delivering the best experience for our customers. Our leading digital capabilities have advanced our ability to sell in new ways, including targeted sales events and online boat shows. Results have exceeded our expectations, and our digital business will remain a top priority and a strategic growth focus.

Turning to earnings. We produced an adjusted $0.38 for the quarter. Again, I am proud of our team since this is without a material boat show, in the face of Hurricane Dorian and was generally in line with the expectations we indicated on our last call. We ended the year with a balance sheet that remains strong and positions us to secure additional accretive acquisitions or targeted product expansions.

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

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

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Thank you, Brett, and good morning again, everyone.

Let me start by also thanking our team for their focused efforts throughout our fiscal 2019 and for the strong unit growth they produced in the September quarter.

For the quarter, revenue was flat at $308 million with same-store sales down 9%, but we were up against a 22% comp last year. The loss of the Tampa show did contribute to the decline. It is encouraging that comparable new unit sales were up about 7%, which implies a decline in average unit price in the mid-teens. As Brett said, this was driven by fewer sales of larger yachts, which is more timing-related. Based on industry data, we believe we continued to gain share in most of our markets for the brands and segments we carry.

Absent the Fraser merger, gross margins increased incrementally from healthy product margins and improvements in our higher-margin businesses like finance and insurance, parts and our marine operations. However, the majority of the nearly 300 basis point increase was due to Fraser. Likewise, the bulk of the dollar increase in comparable SG&A expenses was due to Fraser, with a portion coming from Sail -- from the Sail & Ski merger.

Keep in mind, to make expenses comparable, you need to back out the net store closing and hurricane costs this quarter and the gain last year. For the quarter, interest expense increased due to increased borrowings from additional inventory. After the adjustments noted in the release, our diluted earnings per share were $0.38 this quarter versus an adjusted $0.45 last year.

Moving on to our balance sheet. At quarter end, we had over $38 million in cash. But as a reminder, we have substantial cash in the form of unlevered inventory. Our inventory levels at quarter end increased to $477 million, which is up about 27% from last year. Backing out the Sail & Ski acquisition would result in inventory up around 20%. Some of the increase is due to the timing of the incoming yachts that are needed for major boat shows such as Fort Lauderdale, which starts tomorrow. However, as Brett said, we reduced orders for 2020. And seasonally, inventory will decline as we move through the next couple of quarters.

Looking at our liabilities. Our short-term borrowing has increased to $312 million due to the additional inventory and cash spent for acquisitions and also share repurchases. Customer deposits, while not the best predictor of near-term sales because they can be lumpy due to the size of the deposits and whether a trade is involved or not, are up 43% over last year.

In the quarter, we bought back almost 500,000 shares at an average cost of about $15 per share. And for the year, we bought back approximately 1.7 million shares at an average cost of about $16 per share.

Our current ratio stands at 1.38, and our total liabilities to tangible net worth ratio is 1.36. Both are very strong balance sheet metrics. Our tangible net worth was $305 million or about $14 per share. We own over half of our locations, which are all debt-free, and we have no additional long-term debt. Our balance sheet is a formidable strategic advantage that allows us to capitalize on opportunities as they arise.

Let's now look ahead to fiscal 2020 and our annual guidance. Given the increased choppiness that the industry saw through June, combined with the appearance of stability the last 3 months, it is reasonable to think that the industry units will be down to flat in our fiscal 2020. We are concerned about increased negativity likely to emerge as the election cycle gets closer and how that could impact consumer behavior.

Given these assumptions and our history of typically outperforming the industry, less some inflationary growth, yields same-store sales growth in the low single digits. Adding in the remainder of both Fraser and Sail & Ski for the portions of the year that we have not owned them would add a little over $25 million in revenue. But it does not produce meaningful EPS earnings per share since seasonally, Sail & Ski would normally have a loss during the winter, and Fraser, while profitable, when combined with Sail & Ski, they both will be close to breakeven.

Using operating leverage in line with the last few years and leaning toward caution until we see more consistency in industry trends results in our guidance range of $1.58 to $1.68 for 2020. Obviously, we want to strive to do better. Our guidance uses a share count in the low 22 million share range and an expected 2020 tax rate of about 27% and excludes the impact from any potential acquisitions that we may complete.

Let me provide some additional context for 2020. Marine dealers, including MarineMax, most often lose money in the December quarter. As an example, since 2000, over half of our December quarters produced losses. Additionally, we are up against 5 consecutive profitable December quarters with an 80% stacked same-store sales basis, which is sizable. Given this and the recent choppiness in the industry, we think it's prudent to model a slight loss for the company in the December quarter.

Turning to current trends. October is positive, a build-up of September's very solid results. The Tampa Boat Show as well as the early fall boat shows all went well. But despite these positive trends, we have considerable work to do to deliver a solid December quarter and fiscal 2020.

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

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

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Thank you, Mike.

Looking forward through 2020 fiscal, we will continue to increase our reach as a global company. We will continue to invest in our higher-margin businesses, and we are committed to the alignment of cost with the current and expected industry and economic environment. We have a seasoned team that is cycle-tested and a strong balance sheet that we believe will continue to differentiate MarineMax and provide support for growth. We will continue to pursue and evaluate additional opportunities to complement the business long term.

Consistent with our customer experience strategy, we will continue with boating events to keep our customers on the water with their family and friends, which will result in future business that yield ongoing market share gain. We will also expand and utilize our digital strategy to increase efficiency and further grow the reach of our higher-margin businesses and ultimately build long-term value for our shareholders.

As Mike said, the important Fort Lauderdale Boat Show opens tomorrow, and our team is excited and energized and prepared to have an excellent show.

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) Our first question comes from Greg with Citi.

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

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It's Fred Wightman on for Greg. Just wondering if you could dig into the Tampa show commentary. I know that you said that it was material. I'm just wondering if you could help us size sort of the relative shift from 4Q into 1Q.

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

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I can comment that it normally would have produced double-digit millions sales. It would not have made up for the whole same-store sales decline, but it would have cut the decline down a fair amount.

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Frederick Charles Wightman, Citigroup Inc, Research Division - Assistant VP & Analyst [4]

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Okay. That's helpful. And then just on inventories, I know that there's some impact from acquisitions that you guys called out. But even excluding that, it looks like it's up versus last quarter, and also, that's partially due to seasonality. But from a cadence perspective, can you help us think about how high you think it is where you -- versus what you'd like it to be? What you were seeing from other dealers in the markets that you guys overlap with and the cadence of that normalizing into next year?

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

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I can comment a little bit again. And one thing we didn't really call out is a year ago, if you remember, with the discontinuance of Sea Ray sports yachts and yachts, we actually were probably a little bit lighter on inventory than ideal because we had not received any new product for a while, we had not ramped up with Azimut and Galeon. And so the percentage increase is a little bit skewed because of the decline in inventory that we had ending that year.

But I'd say big picture, if you take -- if we're up 20%-ish after backing out the Sail & Ski merger, we're looking at same-store sales growth of 3%-ish or low single digits. In our guidance, it would tell you we're mid-teens high. And I -- with a lot of dealers we've talked with, we get similar ranges in terms of dollars, not necessarily units are that far out of alignment, but dollars are. And so the adjustment in orders will be in line with that through 2020.

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Frederick Charles Wightman, Citigroup Inc, Research Division - Assistant VP & Analyst [6]

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Okay. And then just very simplistically, if we look at the low single-digit same-store sales guide and flat earnings on the -- at the midpoint, I mean is the biggest delta there just profitability? Or are you guys assuming an uptick in promo activity? Or what's sort of driving the disconnect there?

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

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Brett did call it out to be prudent to expect some additional promotional activity just to make sure we execute on our inventory strategy. So there's a little bit of that baked into that.

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William Brett McGill, MarineMax, Inc. - President, CEO & Director [8]

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Yes. We're happy with the mix and the aging and the quality of the inventory we have, but we're going to probably look to be aggressive and push sales.

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Operator [9]

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Our next question comes from James Hardiman with Wedbush Securities.

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James Lloyd Hardiman, Wedbush Securities Inc., Research Division - MD of Equity Research [10]

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I wanted to first circle back on the inventory commentary. So Mike, I think what you said is that the inventories are maybe mid-teens higher than you would like them to be. Remind us where those stood coming out of the third quarter. It sounds like that's actually gotten worse, which is a little bit of a surprise. And help us understand why that's happening.

And maybe help us square that with -- I know you have a lot of suppliers, but Brunswick talked about pipeline inventories being down year-over-year and [weeks] on hand being down significantly versus the June quarter. They're obviously your biggest supplier. You've got others. But help us sort of square what sounds like inventories that got worse over the past 3 months, whereas it seemed like the effort was going to be to improve those over that time.

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [11]

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Yes. It's pretty simple, James. So a year ago, we did not have as many sport yachts and yachts in inventory. The Sea Ray wasn't building them, and Galeon and Azimut had not ramped up. Remember, it was in June a year ago that Sea Ray discontinued the sport yachts and yachts. And so we are a little bit lower. You fast forward till now, and we do have additional inventory now from other manufacturers plus we've missed the Tampa Boat Show. So the combination of those 2 things is why as a percentage basis, we're higher at the end of September than we were at the end of June.

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James Lloyd Hardiman, Wedbush Securities Inc., Research Division - MD of Equity Research [12]

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But I guess the question then would be excluding those items, it sounds like -- have things gotten better or worse, I guess, over the last 3 months versus where you would like them to be, given some of these puts and takes?

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

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Yes. I think industry trends have stabilized and improved over the last 3 months. I'd say better, I would think -- and I also would tell you that our -- the way the model years work in the industry is you pretty much run through June. And yes, we're very communicative with our manufacturers, and we actually started making reductions last year as early as December when we saw the extreme choppiness.

With the softness cumulatively in the June quarter, a lot of the order decline really falls into what's now model year 2020, which in fact -- which starts July 1 and runs through next June. And so the reduction in orders really started in the June -- I'm sorry, in the September quarter in any meaningful quantity.

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James Lloyd Hardiman, Wedbush Securities Inc., Research Division - MD of Equity Research [14]

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Okay. Makes sense. And then a second question for me. You talked about sort of a mid-teen AUP decline in the quarter. It sounds like a lot of that was timing related. Was the timing of that also associated with the Tampa Boat Show? And if so, or even if not I guess, should we get a positive AUP as we think about the December quarter?

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

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Yes. I think if you go back to last year's September quarter, we called out the unusually strong same-store sales growth and how 2/3 of it was AUP-driven. So I would tell you that last year's September probably saw more larger yachts closed than would be normal, which is what drove up the same-store sales. I think this year's September, again, absent the Tampa show, is probably more like a normal September quarter in terms of mix.

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

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And the timing of -- like we mentioned, the timing of larger yachts may be moving in or out of months can have a big swing pretty quick.

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [17]

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Right.

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James Lloyd Hardiman, Wedbush Securities Inc., Research Division - MD of Equity Research [18]

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And just to clarify, though, that's timing out of the fourth quarter into the first quarter as opposed to out of 3Q into 4Q. Is that right?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [19]

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Yes. It's hard to predict exactly when the bigger yacht business really hits. I would say in general, you're right. Generally, it's really October 1 through March 31 because of a couple of major boat shows. You've got Fort Lauderdale, you've got Miami, and you got Palm Beach, which all tend to be much larger yacht sales. Plus Florida sort of becomes more active in the wintertime, which is where larger product tends to sell. So generally, it's more geared towards those 6 months than summer time.

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Operator [20]

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Next question comes from Michael Swartz with SunTrust Robinson Humphrey.

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Michael Arlington Swartz, SunTrust Robinson Humphrey, Inc., Research Division - Senior Analyst [21]

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Mike, I apologize if I missed it but did you give any color on your current backlog? I would assume that shift in timing of the Tampa show into October did have some positive impact on, I guess, where you stand today relative to last year. Is that fair?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [22]

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Yes. So we did comment that customer deposits are up a lot. Our backlog looks pretty good right now as well. We're sitting in a healthier place on the strength of September, which was good. And you're right, with Tampa Boat Show moving, that's beneficial for fiscal 2020.

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Michael Arlington Swartz, SunTrust Robinson Humphrey, Inc., Research Division - Senior Analyst [23]

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Okay. And then with some of the store optimization activities, I think you said this in your prepared comments, you're -- it at least sounds like you're fairly comfortable that you can offset some of the lost revenue from store closings through some of the flagships in those locations and through some of your digital efforts.

So let's just make the assumption that it's a revenue-neutral proposition, closing some of those stores. Is there a way to look at how much cost, taking those 8 stores out of the base, will, I guess, flow to the -- flow through to the P&L on a 12-month basis?

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William Brett McGill, MarineMax, Inc. - President, CEO & Director [24]

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I'll let Mike comment on the expense side. But you're right, assuming that -- we looked at each of those markets on the revenue side and really tried to calculate the best we could that can we get rid of one of these overlapping stores and still produce the same revenue and service to all of our customers. So you are right on that. It's our goal and it's very achievable.

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [25]

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Yes. There's clearly a cost reduction that comes from it in terms of fixed-cost leases, personnel, all of that. There's also a lot of other initiatives that we are undertaking and looking at, at the same time. It wasn't just the 8 stores that we went to address from an expense perspective. We believe we're making inroads in other areas of the business.

So I don't want to try to throw out a number just on the stores because there's much bigger efforts that we've done as we've gone through the summertime in the fourth quarter to try to get the expense structure in line with what the industry looks like it's doing. So we haven't necessarily baked all of those benefits into our guidance number, which is probably going to be your next question, as we're trying to make sure that they're all executed properly, and that we're seeing benefits from all of them.

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

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Okay. That's helpful. And then just a follow-up -- a last question on, I guess, the shift out of the Tampa show. Just -- but like general color and your thoughts maybe on -- maybe the dynamics of the timing of that show relative to Fort Lauderdale because it's within a 7 -- a 1-week stretch, you're going to have 2 fairly large boat shows. So maybe any thoughts into how that plays out? Or are you pulling from Tampa or pulling from Fort Lauderdale? I'm just trying to get a better sense of that.

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

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Yes. It's a good question. I think that a couple of things, the first one being when you move a show darn near a month different, it's just a different time of year with different consumer behavior. So it -- that alone can have an effect. However, being a week before Lauderdale, I think for the most part it doesn't affect that show exactly. But somebody that might be looking at a bigger boat may delay and go down to Lauderdale also since it's a week away. But overall, you'll -- you should still capture the sales you need within a reasonable timeframe.

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Operator [28]

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Next question comes from Joe Altobello with Raymond James.

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Joseph Nicholas Altobello, Raymond James & Associates, Inc., Research Division - MD & Senior Analyst [29]

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So first question, wanted to speak to the December quarter. I think, Mike, you mentioned earlier that it's probably prudent to model an earnings loss in the December quarter. And I'm curious you've recorded a gain of $0.21 in the year ago period. It's been 6 -- 5 or 6 years that you reported a loss in the December quarter. And with the Tampa Ship, which gets you, call it, $10 million-plus of additional revenue, why would we expect a loss this quarter?

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

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You know what, I made that comment. And a lot of it is all the years I've been doing this seasonally, the December quarter typically is a tougher quarter for the industry. I agree, we've had some nice quarters of late. We have -- we are now a little bit more seasonal with Sail & Ski. I just think it's prudent to think of it as last year's $0.21 will be unusually strong for a December quarter. Getting something closer to a loss to breakeven is probably the right way to think about it.

Obviously, we're going to try and do better, and we've done better the last 5 years in a row. We're also up against a really strong comp, Joe, of 5 years cumulative of 80% in an industry that looks like it's starting to find its sea legs. But we're not sure yet. So we're trying to be cautious about the near-term outlook for the December quarter.

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Joseph Nicholas Altobello, Raymond James & Associates, Inc., Research Division - MD & Senior Analyst [31]

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Okay. Understood. And then shifting gears to the outlook for next year. I'm a little surprised at the guide given the stability that, Mike and Brett, you guys both cited this morning coming out of the September quarter. And while your tone does seem more constructive than 3 months ago, you still expect the industry units to be flat to down next year. I know there's a lot of uncertainty with the economy and with the election. But how much conservatism is built into that number? Or are you seeing maybe a more affluent buyer getting more cautious as we are headed to 2020?

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

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I'll take a comment, and Brett can chime in if he wants to but I see that we have a lot of people on the call who really cover the industry pretty closely. And if you really look at the September quarter, while it clearly is better than the 12 months before where it was choppy to down to downright down in the month of June, the main strength in the September quarter is pontoon boats and wake boats. The rest of the segments are choppy. They're up and they're down. They're not consistently up. So we're looking at -- we commented about down to flat in our fiscal 2020, which obviously starts right now and really for our segments.

And if you look at the data, you can see that there's still a lot of choppiness out there. I wish that all the rest of them were quite as consistent as pontoon and wake were for the quarter, but they're not. And so we're just trying to -- we're looking for more stability, for sure, and we feel better than we did. But we're reflecting on how the trends really are.

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William Brett McGill, MarineMax, Inc. - President, CEO & Director [33]

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Yes. And I'll add to that. Just our cautiousness is, although we ended the quarter and the year very well, the makeup in that quarter on a month-to-month basis was very choppy. And so it -- that just -- there was not a 3-month trend of continual growth in there. It was a choppy growth to get to the end of September. So I think that it provides caution for us.

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Operator [34]

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Our next question comes from Eric Wold with B. Riley and Company.

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Eric Christian Wold, B. Riley FBR, Inc., Research Division - Senior Equity Analyst [35]

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I just have a couple of questions. I guess, one, maybe just talk kind of a high level as you guys think about where you were last year or maybe at the beginning of this year. What you're seeing with purchasing behavior, specifically around financing requests, approvals, maybe changes in average price points in general, time people are taking to kind of close the deal and finalize their decision?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [36]

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Yes. I can comment. I mean retail financing and liquidity out there for customers is incrementally probably better today than it was a year ago. There isn't a -- that's not any issues in terms of creating liquidity for consumers to buy product, for sure.

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Eric Christian Wold, B. Riley FBR, Inc., Research Division - Senior Equity Analyst [37]

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Okay. The other 2?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [38]

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The other one -- what was the other 2, Eric? What was...

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Eric Christian Wold, B. Riley FBR, Inc., Research Division - Senior Equity Analyst [39]

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Actually, can you kind of -- changes in average price points people are looking at? And then maybe timing from when they start looking at a boat to kind of finalize a deal. Are they taking longer to make decision or is that kind of unchanged?

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William Brett McGill, MarineMax, Inc. - President, CEO & Director [40]

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Yes. I think that on the timing of deals, I think we haven't seen a big shift by any stretch. Like we said, we're doing a lot of things online, sort of getting good visibility about our customers' activity online and up until they purchase. And we're not seeing anything different there. In fact, we're -- we think we have a lot more data now to help us with that.

As far as like Mike said, it seems that month-to-month, things change on what the consumers are looking at, whether that's pontoons or wake, or the next month, the high yacht activity. But it's back to that -- I hate to go back to it, but that choppiness of -- we don't see just a consistent look, let's say, for a yacht customer. It's there and then it's off for a little bit. And it's back with a vengeance and it's soft a little. So...

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Eric Christian Wold, B. Riley FBR, Inc., Research Division - Senior Equity Analyst [41]

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Okay. I mean with the 8 store closures and the store optimization strategy, how does that shift or change your acquisition strategy in general in terms of what types of acquisitions you'd want to make, and how you'd want to expand the market? Is the one flagship is better than having multiple kind of overlapping locations? And then coming on back is how would you frame the acquisition environment in general right now?

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William Brett McGill, MarineMax, Inc. - President, CEO & Director [42]

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Yes. I think as far as how we would look at acquisitions, it really doesn't change it, how we're looking at them because they're successful in a market. I think that any dealer we would be talking to that has multiple locations, they're probably thinking exactly the same things we went through. If they have a satellite location or a smaller store up on a marina at a remote lake, do they need it or not. And so it doesn't really change that fundamentally.

And -- but to your second question, the acquisition pipeline is full. It's out there. We're looking at a lot of different things.

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Eric Christian Wold, B. Riley FBR, Inc., Research Division - Senior Equity Analyst [43]

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Great. And then just a final question for me. You talked about how we should probably expect a little more promo environment heading into the boat show season. I know you started seeing that at last year's boat show season. So are we assuming kind of significantly more elevated than what you had even last year? Was there going to be a dip midyear and get back to last year's levels? How should we kind of frame it year-over-year?

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

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I think the way that Brett said it is incrementally we'll be a little more promotional. So that would be incrementally even more than what we -- and remember, that was us being more promotional last year just given all of the uncertainty that came out of the month of December. And it worked. We had phenomenal boat shows. So there was -- store traffic there was lighter. So I think we've gained incrementally a little bit more.

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Operator [45]

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Our next question comes from Scott Stember with CL King.

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Scott Lewis Stember, CL King & Associates, Inc., Research Division - Senior VP & Senior Research Analyst [46]

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If you smooth out for the shift in sales up in the Tampa show from this quarter to the next quarter, can you maybe just frame out where are you seeing ASP trends, mix trends just so we gain an idea of where things were trending before the big show?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [47]

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Well, when we talk about mix trends and the timing of sales of larger yachts, I think we're probably reading a little bit too much into the timing of all the ones we closed in the September quarter last year, which is unusual. We haven't seen any real downward shift to the type of boats we're selling or upward shift. We're pretty much, I will say, seeing generally consistent demand. Brett said it's a little bit choppy from time to time at the industry, data shows. But the Tampa Boat Show, while it's a factor, it's not the overall driver of the AUP decline on a year-over-year basis. It's more just the timing of the (technical difficulty) that closed last September quarter that may have been written 8 months before the September quarter, just what they closed.

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William Brett McGill, MarineMax, Inc. - President, CEO & Director [48]

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Yes. I'll add that we don't really see a big shift in the average unit price once it's been smoothed out, as you said, and we get a little more time when we develop. But I don't see any fundamental shift in that mix.

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Scott Lewis Stember, CL King & Associates, Inc., Research Division - Senior VP & Senior Research Analyst [49]

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Got it. And you talked about some inconsistent trends or choppiness in the quarter. Could you just by month let us know how sales trends were?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [50]

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Yes. I can say -- so July overall was a decent month as we said it was going to be. There were certainly puts and takes, and it's similar to what the industry saw. August was a softer month, which is usually consistent as everybody gets back to school. Yes, and hurricanes are being announced and tracked and all of that stuff, which affects a lot of our business in the South and in Florida.

You fast forward to September, and we saw a very strong September, as I think the industry did as well across just about all segments that we carry in terms of our stores and our markets. And it wasn't located at any 1 or 2 geographies. It was fairly broad-based. So it does make us feel a lot better. I know that's where some of your questions are coming from. But it's really 1 month. We need many more months, right?

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Scott Lewis Stember, CL King & Associates, Inc., Research Division - Senior VP & Senior Research Analyst [51]

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Got it. And last question about just for modeling purposes for next year on the revenue side. You talked about, I guess, a low single digit comp. I think you said about $25 million, I guess, in incremental sales from acquisitions. And again, how do the store closures play into the mix for next year?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [52]

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So they really -- nothing that you can model in. So in our guidance numbers, we've factored in some thoughts around our expense structure reduction, which we're still -- we've backed it on. We put it in place. We wanted to see that it's actually getting us the results that we're expecting out of it. And if it does, we'll get better leverage in the business. But we want to see it executed upon. No real difference in your modeling other than what we set in the guidance numbers.

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Operator [53]

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Our next question comes from David MacGregor with Longbow Research.

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Colton West, Longbow Research, LLC - Associate Equity Analyst [54]

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Colton West on for David. There was a report out this morning from the NMMA on boating industry CEOs' sentiment, showing a rather large increase year-over-year in the percentage of CEOs that felt that current business conditions were declining. It sounds like you guys are part of the group that sees conditions as being more stable. Where do you think you might differ from what the more negative-leaning CEOs are seeing out there?

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William Brett McGill, MarineMax, Inc. - President, CEO & Director [55]

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Actually, we need to see the study, I guess. I think some of our caution for looking at 2020, like Mike said, we're always going to do our best to sell a lot more than we -- our stores have a budget that -- and goals that are very high, and we push them to do everything they can. But we do see this choppiness and uncertainty and collection year and trade wars and tariffs. These things just -- they all seem to somewhat affect our more affluent consumer.

So we don't see people completely saying, "Hey, I'm out. I'm not buying boats." People still want to go boating. They're still out on the water. They're still attending all of our events, and those are the signs we look for. But there's a lot of things in the -- out there in the -- that they hear on the news that is affecting it.

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Colton West, Longbow Research, LLC - Associate Equity Analyst [56]

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Right. And I guess are you seeing the choppiness continue into October so far? Or are you seeing it being more similar to what was seen in September?

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

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So we've commented on our trends. Our trends were that October is starting off strong, following the momentum from September. Industry data, it will be interesting to see that when it comes out in November.

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Colton West, Longbow Research, LLC - Associate Equity Analyst [58]

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And then just a few follow-up questions. Inventories are obviously higher year-over-year. Where within the product mix are you seeing the greatest surplus?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [59]

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I'd say it's, unfortunately, a little more broad-based. It's not in any one area. I'd say -- well, I would say timing-wise, we are heavier in sport yachts and yachts or larger dollars today, which is more timing-related, as Brett and I both talked about. Having product come in, in time for the Fort Lauderdale Boat Show. So that is timing related that we may not have had at 9/30 last year. But inventory in general in the industry, I think, is elevated.

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Colton West, Longbow Research, LLC - Associate Equity Analyst [60]

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Okay. And then on the product mix, where are you seeing the greatest degree of discounting?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [61]

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We're not seeing a ton of discounting right now, and I don't think the industry is either anywhere in any segments.

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Operator [62]

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We have a follow-up from Michael Swartz with SunTrust Robinson Humphrey.

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Michael Arlington Swartz, SunTrust Robinson Humphrey, Inc., Research Division - Senior Analyst [63]

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Just to piggyback on that last question. I mean just for clarification purposes here, when you're talking about incremental promotion year-over-year, you're talking about things that hit SG&A, not cost of goods, correct, or unit sales price?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [64]

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I think we're talking about a little bit of both potentially.

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Michael Arlington Swartz, SunTrust Robinson Humphrey, Inc., Research Division - Senior Analyst [65]

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Okay. And then the second question, just in terms of some of the onetime items that you excluded in the quarter. I may have missed it on the -- in the press release. But what was the net impact on a pretax basis of some of those things you called out, whether it was the consolidation or the hurricane costs or I think you got a settlement, as well?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [66]

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Yes, the net is $2.3 million in the current year.

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Michael Arlington Swartz, SunTrust Robinson Humphrey, Inc., Research Division - Senior Analyst [67]

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Was all that in the fourth -- is that -- that's what hit the fourth quarter, though, right?

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Michael H. McLamb, MarineMax, Inc. - Executive VP, CFO, Secretary & Director [68]

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I'm sorry, that's fourth quarter. On the annual basis, it's $1.8 million.

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Operator [69]

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I would now like to turn the floor over to Mr. McGill for closing comment.

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William Brett McGill, MarineMax, Inc. - President, CEO & Director [70]

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Well, thank you all for joining the call today. Both Mike and I are available all day, so please reach out at any time with any questions. And we look forward to updating you on our progress on the next call. Thank you.

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Operator [71]

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This concludes today's conference. Thank you for your participation.