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Marinemax Inc (HZO) Q1 2019 Earnings Conference Call Transcript

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Marinemax Inc  (NYSE: HZO)
Q1 2019 Earnings Conference Call
Jan. 17, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the MarineMax 2019 Fiscal First Quarter Earnings 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.

Brad Cohen -- Investor Relations

Thank you, operator. Good morning, everyone and thank you for joining this discussion of MarineMax's 2019 fiscal first quarter. I'm sure you've all received the copy of the press release that went out this morning, but if not, please call Linda Cameron at 727-531-1712, and she will email one to you right away. I would now like to introduce the management team of MarineMax; Mr. Brett McGill, President and Chief Executive Officer; Mr. Mike McLamb, Chief Financial Officer of the company and Management will make a few comments about the quarter and then be available for your questions.

With that, let me turn the call over to Chief Financial Officer, Mr. Mike McLamb.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

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 involved 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 the Brett. Brett?

Brett McGill -- President and Chief Executive Officer

Thank you, Mike and good morning, everyone. We're pleased to begin fiscal 2019 with strong earning that surpassed our prior years' first quarter record result, which makes this year our best first quarter in our over 20-year history. The results in the quarter were driven by growth in revenue and strong increases in margin. The margin expansion was supported by equal contribution across all our products and business line. Specifically, we produced gains in new and used boat margin, while also driving good growth in our higher margin businesses that include finance and insurance, service and parts storage and our charter operations.

The growth in the higher margin businesses has been a long-term focus and should yield incremental increases over time. Training, process improvement and several new operating initiatives contributed to the margin gains this quarter. Historically, we have commented that our earnings potential is much greater today at lower industry unit levels than before the financial crisis. Back to back record profit in our December quarter illustrate that point, well, as the industry units are still off by over 35%.

I'm proud of our team's effort as they stay disciplined to our pricing strategy which helped us drive product margin expansion in the quarter. This was achieved with same-store sales that were up only slightly. It's important to note that we have had unusually strong same-store sales growth of over 80% periodically over the last five consecutive December quarters. So it's not surprising that this quarter saw a modest growth.

Total revenue was up $5 million to $242 million, setting a new revenue record for the December quarter. I would add that the quarter started off very strong, including one of the best Fort Lauderdale Boat Shows we have ever produced. However, as the industry data shown, December was weaker than expected and tempered the overall strength in the quarter.

The December quarter tend to have a greater percentage of revenue generated from larger boat sails, due to the Fort Lauderdale show in the return of the Northern (ph) to Florida. For the most recent December quarter, revenue from larger boats continue to increase. Other strong product categories included premium outboard fishing boats and outboard runabout. The outboard trend continues to be strong.

Now turning to operation, while earnings and cash flow rose, we will continue to focus on controlling costs as we move ahead. The absolute dollar increase in SG&A is somewhat misleading, as over half of it is from the combination of the Island Marine acquisition completed January last year, the opening of a new store on Miami Beach and the ramp up of our charter business, which was virtually closed in December last year due to Hurricane Irma.

While we emphasize this point often, it remains critical that our manufacturers are continuing to innovate with both technology and fresh design. It's been proven time, and again, that new models are highly sought after with very strong demand. That stays true today. To that point, we are now in the early portion of the important boat shows season, and we have lots of innovative new models being highlighted. Today also marks the start of the New York Boat Show. The enthusiasm coming out of the early shows is growing.

As we enter the busiest two quarters of fiscal 2019, our overall product mix and inventory are very well positioned. As we work through January, the early results from the boat shows is encouraging, while show results and attendance has been mixed relative to prior years, we're seeing improving trends and premium product seems to be growing in strength. This dovetails well for MarineMax since that is basically the sweet spot for our business.

This also worth noting that the industry is not in a discounting mode. Pricing activity that we have seen at the shows is consistent with normal boat show promotion. Since we have our biggest quarters in front of us, it's our intention to build on the results of the December quarter, while the recent financial and global market volatility may have impacted the December selling period, we have seen more consistency as we started this new calendar year.

We understand that having the right models across all segments, continuing to provide our customers with outstanding service and keeping our customers on the water through our Getaways! will help further differentiate MarineMax, and ultimately these efforts and our differentiated approach will result in the continued expansion of our share of the market.

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

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Thank you, Brett and good morning, again, everyone. Let me also thank our team for the positive and profitable start to fiscal 2019. For the quarter revenue increased $5 million to $242 million, same-store sales were up about 1%, driven by large boat sales and an increase in our average units selling price.

However, units for comparable brands were down low single digits to mid single digits in the quarter. Certainly, differences by brand and segment exists, and premium brands were either up or flat with a few exceptions. Based on industry data, we believe we again gain market share in the quarter. Gross margins expanded over 120 basis points to 26.2%. The growth was driven by product margin expansion and growth in our higher margin businesses. Our ability to continue to expand gross margins is encouraging.

Selling, general and administrative expenses were up $4.2 million to $54.5 million. As Brett explained, the primary reasons for the increases were related to a new store, an acquisition in 2018 and the ramp up of our charter business. These expenses were coupled with a handful of other elevated items. Needless to say, we're watching each expense line item carefully. For the quarter despite a rising rate environment, interest expense was down slightly due to increased cash and liquidity which drove down our average outstanding borrowings.

Our pre-tax earnings rose modestly to $6.5 million, which exceeded the record pre-tax earnings level obtained in the December quarter last year. Our net income increased to $4.9 million and earnings per diluted share were $0.21 compared to an adjusted $0.23 last year. As for our balance sheet at year end, we had about $39 million in cash. As a reminder, we have substantial cash in the form of unlevered inventory. Our inventory levels at quarter end were up slightly as expected, to $445 million as we replenish inventory from the loss of Sea Ray's larger boats. We feel well positioned with the right product entering our seasonally biggest quarters.

Turning to our liabilities, our short-term borrowings were down 12% to about $271 million due to our enhanced cash and liquidity position. Customer deposits were not the best predictor of near-term sales, because that can be lumpy due to the size of deposits and whether a trade is involved or not, we're up 7% from last year. Our current ratio stands at 1.56 and our total liabilities to tangible net worth ratio is 1.00, both outstanding balance sheet metrics.

Our tangible net worth jumped to $334 million or $14.27 per share, compared to $12.48 last year. We own about half of our location, which are all debt free and we have no additional long-term debt. Before discussing guidance, I want to remind you that we give annual guidance. Well, we are pleased to start the year off very profitably, given seasonality, it is a relatively small profit as compared to our annual guidance, meaning, the next three quarters are actually much greater than 75% of the year's earnings.

Turning to guidance, we are reaffirming our earnings per share guidance for fiscal 2019 of a $1.85 a $1.95. Our guidance takes into account that we're up against the solid three-year stack same-store sales growth of about 37%. Our guidance assumes, we will grow same-store sales 5% to 10% and that we will have leverage in line with the last few years. Our guidance used the share count of around 23.5 million shares, it also uses an expected 2019 tax rate of 27% and excludes the impact from any potential acquisitions that we may complete.

As for current trends, January is on track to finish with positive same-store sales growth. Our backlog is higher today than it was a year ago. And the shakiness that the industry seems to have felt that December quarter appears to be subsiding. We are watching Boat show trends carefully, and they are improving. That said, we will work to maximize our results as we deliver the best boating experience to our MarineMax customers.

Let me now turn the call back to Brett for some closing comments.

Brett McGill -- President and Chief Executive Officer

Thank you, Mike. Looking ahead, we seek to drive consistent improvement in performance on an annual basis. This includes the execution of our digital strategy, the alignment of the expenses with sales, growing our higher margin businesses and actively pursuing accretive acquisition opportunities or brand expansion. With our energized team and positive consumer confidence, we are ready to build upon our strong start in fiscal 2019 as we continue to change people's lives by connecting them with their family and friend boating with MarineMax.

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

Questions and Answers:

Operator

Thank you. (Operator Instructions) We'll now take our first question from Greg Badishkanian of Citi. Please go ahead.

Fred Wightman -- Citi -- Analyst

Hey, guys it's actually Fred Wightman on for Greg. I think that (inaudible) commentary you've had for the high end product was pretty positive. If we look back historically, does that higher end product is that usually a good leading indicator of where the overall industry is going?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Yes, I think in prior years, it usually has been from our experience. It's also, most everything we sell you would call in that higher end of premium and product. We have a couple brands and a couple segments that maybe aren't quite there that we were referring to. But, yeah, it seemed to be from our perspective, Fred.

Fred Wightman -- Citi -- Analyst

Okay. And then just for the industry, I mean, it sounds like those softened a bit through the quarter, but there's been some positive signs early in January. What do you think drove that sequential slowdown last quarter's. Is there anything that you guys are concerned about or is it just sort of watchful waiting?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Our guests would probably be the volatility in the marketplace it certainly occurred from late November through December. I think there's a -- the economic signals are still very strong out there, jobless claims, unemployment, consumer confidence. There's so many things that are positive, but the only thing that we've really watched, that you guys probably watched also, is just the extreme volatility in the -- as the quarter closed. So perhaps that was it, maybe there was something else, in fact, to get. But again, the read coming out of the early boat shows has been pretty strong.

Fred Wightman -- Citi -- Analyst

That makes sense. And then just one final one, I mean, how much more room do you think there is to improve that F&I business, the server -- the service business and then the charter businesses?

Brett McGill -- President and Chief Executive Officer

Yeah. As I noted there, we're focused with some new initiatives and strategies and technologies that to grow those. And in fact, there was quite a bit of growth. That takes a little time, service and technicians and facilities. But we're, I would say, we've had a pretty heighten focused on those over the last year and we'll continue to grow those as well.

Fred Wightman -- Citi -- Analyst

Thanks guys.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Thanks, Fred.

Operator

We'll now take the next question from Scott Stember of C.L. King.

Scott Stember -- C.L. King & Associates -- Analyst

Good morning, guys.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Hey, Scott.

Scott Stember -- C.L. King & Associates -- Analyst

Can you maybe talk about the Sea Ray transition. How much of an impact that had in the quarter? Meaning, how many boats were left of the large Sea Ray yacht sales to be sold in this quarter this last quarter? And maybe just talk about how your position going forward?

Brett McGill -- President and Chief Executive Officer

I'll let Mike talk about the few of the numbers. But I just as far as our transition with our Azimut and Galeon brands, when we were able talk to those manufacturers about additional orders and products that really fit a spot for us. It's really helped us and been able to fill the -- that's more of a general overview that our strategy of filling that revenue with those brands is working. And that Mike, I don't know if you have additional comments on that.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

No, I'd remind you, so yeah the September quarter, we had really strong same-store sales growth. And that was a quarter long after the announcement of Sea Ray or after the announcement of Sea Ray and you would assume that we had less Sea Ray revenue on bigger boats and we still were able to produce very strong same-store sales growth. Even this quarter, we would assume we had a lot less large boat Sea Ray revenue and we did produce positive same-store sales growth which is great.

I think technically, the answer to your question, I think we started the quarter with around 20 maybe 21 uncontracted large products. We got to look at what's available, that's not under a contract yet, and I think we ended the quarter less than half of that. So we're going to the March quarter with a single-digit number of product that we fully expect as we said a quarter to two ago, we'd be out of the product by the end of March.

Scott Stember -- C.L. King & Associates -- Analyst

That's great. And those 21 units, I guess, what's left. The prices now holding up pretty good?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

You know what, it's amazing that people seek the product. So I'd say, yes. The pricing is probably not as deals we'd like it, but it's -- with Brunswick support and with ours and with the demand that consumers are seeking the product, it's -- working as you would expect when you're unwinding a product category like that.

Scott Stember -- C.L. King & Associates -- Analyst

Got it. And then last question on the SG&A, I don't know you guys how deep you went into it. But, up about 120 basis points year-over-year and dollars up by $5 million. Outside of the acquisition, was there any other one-time items in there or things of mentioned to explain the increase? And thanks.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

There's not really any one-time items and there were three things that Brett mentioned. One, a new store that we had opened. The Island Marine acquisition. Then really last year our charter operation was virtually closed because of -- Hurricane Irma and it's now up and operational. Then there are some things that we purposely incurred, they could have maybe incurred in March or could have occurred in December quarter, and the timing of it fell in the quarter. That would explain it -- the chunk of the rest of it. But we're watching it carefully. Those three items that we mentioned, the charter, the store and the acquisition, those all will have greater revenue going forward into bigger quarters like March and so forth that would bring -- help to bring down the SG&A as a percentage of revenue number.

Scott Stember -- C.L. King & Associates -- Analyst

Got it. That's all I have. Thanks for taking my questions.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Thanks, Scott.

Brett McGill -- President and Chief Executive Officer

Thanks you.

Operator

We'll now take our next question from Joe Altobello of Raymond James. Please go ahead.

Joseph Altobello -- Raymond James -- Analyst

Thanks. Hey, guys. Good morning.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Hey. Good morning, Joe.

Joseph Altobello -- Raymond James -- Analyst

First just had a couple of clarifying questions. I guess number one, I think Mike you said units in the quarter were down mid single. Is that correct?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Yeah. I said low single-digit to mid single-digit. Right.

Joseph Altobello -- Raymond James -- Analyst

Okay. And then second, I thought you said earlier that boat show results were sort of mix, then I think later on you said boat show results were strong. So I'm curious, maybe I misheard. I just wanted to get a clarification there?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

When you probably heard me answer that question when I said they're improving just a minute ago. So I think, yeah the attendance has been mixed when you see it out there, some weather related, some not. Boat show result is -- have been slightly mixed, but we're encouraged by some improvements we're seeing.

Joseph Altobello -- Raymond James -- Analyst

And then lastly, last year during the boat show season there was a lot of chatter about Sea Ray from competing brands, I could tell you that first hand, hurt a lot. I would imagine that did have some impact on sales in the March quarter. With that now behind us, are you starting to see some better sell through at the shows than you saw it the last year?

Brett McGill -- President and Chief Executive Officer

It's probably a little back to the question you just asked before, I think when you take a sales team in, focused and not wondering about different brands. We're attacking these shows with the products that we now have and that are stable. So I think you just got a better sales team. The customer comes in without all the noise. It's clearly better -- we can focus our training properly as well too.

Joseph Altobello -- Raymond James -- Analyst

Right, OK. Great. Thank you guys.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Thanks, Joe.

Operator

We'll now take our next question from Seth Woolf of Northcoast Research. Go ahead, please.

Seth Woolf -- Northcoast Research -- Analyst

Hey, guys. Thanks for taking my questions. I guess it sounds like things are improving at retail early on. So two questions there. The first one would be, why -- this is two parts (inaudible). First one really would be, what do you think has contributed to it turning around? All of a sudden, if it's started, is just the markets or what do you think it improved, in January? And then a number of times you guys called out the premium brands. So is that -- can you maybe drill down a little bit into what you mean by that? Because I would think often times that the premium brand buyer would be more sensitive to the market and it sounds like you said it was pretty strong throughout all of 4Q? So that's first question.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Turn around, I said -- I'd just make a comment that the December quarter, I mean, we were down slightly on a quarter that's had five years of very strong same-store sales growth. So we -- while the industry data clearly is pretty choppier for the December quarter. We're not saying that we really felt all that choppiness throughout the whole quarter, maybe a little bit in the month of December. And I think that probably does speak to the type of product that we sell quite frankly in our team.

Brett McGill -- President and Chief Executive Officer

Yeah, and I think just back to our comment I made in the -- in our -- the call earlier was, yeah we started out the quarter with Fort Lauderdale Boat Show being a record show for us with great sales tempered than a little as we get into December with a lot of noise and volatilities. So really overall there were some great signs in the quarter.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

And our show comments are -- our comments about our shows and then also we're talking to other manufacturers and other dealers and it seems as January has progressed here that there -- that the shows are getting better and what's causing that I -- it's -- it could very well be better stability right now, it seems most of the other economic factors are the same as they were before the year change which have been pretty good, pretty strong. And to comment on premium -- our customer just seem (ph) to be resilient and holding up well.

Seth Woolf -- Northcoast Research -- Analyst

Okay. All right. Thanks for that. I guess then just -- but thinking about inventory levels, you guys have done a good job, the last few quarters the inventory has been in good shape. I guess we did get a little bit of a hiccup and I know it's a seasonally small month, but has this changed the way you're thinking about managing inventory? Maybe would you look to reduce it a little bit further? Is it no change in how you're thinking about it from three months ago or it doesn't sound like there is any promotions in the market. Just curious how you're thinking about that aspect of the business?

Brett McGill -- President and Chief Executive Officer

We look at our inventory every single day and just to monitor every granular detail of what's going on. Get feedbacks from our team. We feel good about our inventory position right now, but every day we're looking at what we can do to sell through, take advantage of the promotions the manufacturers have out there and be strategic about our orders and when those orders arrive.

Seth Woolf -- Northcoast Research -- Analyst

Okay. So I guess just to touch on a point, but you brought the promotions are you seeing a change in promotional activity? And then I guess more broadly speaking with inventory, are you thinking of reducing inventory in 2019? Is there an opportunity that you see now that maybe you didn't see a couple months ago?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Yeah, certainly I think that we commented that the promotions of boat shows are normal. There's nothing that seems different than normal out there. And from an inventory point of perspective, we talked that we expected inventory to decline as we were going through the last fiscal year, just given the reduction, honestly, a product from Sea Ray, large boats. And then we anticipated that inventory would increase this year as we're replenishing that.

So, our increase this quarter is in line with what we would expect. There's a sizable reduction of how many Sea Rays above 40 feet we have in our inventory and with things coming in from Galeon and from Azimut and other brands, you would expect it to go up. And then you dovetail of that everything that Brett said, that we watch inventory and we monitor it carefully and if we ever see a reason to reduce it, we'd reduce it. But we feel pretty good about 2019 as we're sitting here.

Seth Woolf -- Northcoast Research -- Analyst

Awesome. Thanks, guys.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Thanks.

Brett McGill -- President and Chief Executive Officer

Thank you.

Operator

We'll now take our next question from David MacGregor of Longbow Research. Please go ahead.

David MacGregor -- Longbow Research -- Analyst

Yes. Good morning and congratulations on a great quarter.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Thank, David.

Brett McGill -- President and Chief Executive Officer

Thank you.

David MacGregor -- Longbow Research -- Analyst

Hey, just on the SG&A, what should the rate of leverage be? I mean, in a clean quarter today, where does that stand?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

I would tell you that theoretical leverage that you guys have heard me say before, when you add a dollar of sale, you ought to be in that 12% to 17% range, something like that. We've had some struggles getting there from time to time. But last year it was pretty good, it was in that sweet spot. So that -- that's not changed. I think what you have is, you have a small seasonal quarter. You have a Northern acquisition we did last year that doesn't have as much revenue coming in. You have our charter operations, which doesn't have much coming in. Then you have a store that we opened, which doesn't have as much coming in. So the theoretical leverage that still exists in the operation.

David MacGregor -- Longbow Research -- Analyst

Okay. And then, I know manufacturers are working right now to raise prices. So just what are you seeing in terms of inflation and then your invoices? And how is that going to play out in terms of the timing of the pass through and how are your customers accepting that?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

What honestly, I would say, on average, we probably have seen a little bit more of a increase this year than we typically do, and that started really at the end of last summer, and the -- our ability to pass it through has really spoken very loudly by our increase in margins of 120 basis points. And so the disciplines and the training that we've done with our team and then also the excitement of the new models and the innovative -- innovations that they all have is overcoming any amount of a cross-crease.

David MacGregor -- Longbow Research -- Analyst

It would seem that different points in the line structure, though there might be different sensitivities to pricing, is the -- are the price increases tilting your mix one way or another? In other words, some customers respond to it, others don't?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

No it's, I mean there is -- this year there has been a -- I mean, there's always a price increase every year. There's a modestly higher price increase this year basically across the board, on every product and really we've been successful on a brand by brand basis of passing on and a lot of it's -- the training that Brett talked about with our team. A lot of this -- the differences in the product itself it's better that allows us to do that.

David MacGregor -- Longbow Research -- Analyst

And then just back to Joe's question about the units being down low single-digit to mid single-digit. Could you just open that up for us a little bit? You started off talking about, strength in premium fishing and outboard runabouts and larger boats. Where did you -- where were the negatives?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

I -- we don't typically break it down by segment, but when you think about when we say premium, you think about all the different brands we have. You could probably assume there's a category that you -- it's still a great product, but it maybe more of a price point product which should be aluminum. But all the rest of our product has done reasonably well with a few exceptions in the quarter.

David MacGregor -- Longbow Research -- Analyst

Right. And what can you say about pontoon sales right now?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Pontoons sales have been mixed of late.

Brett McGill -- President and Chief Executive Officer

Yeah and that December quarter is a very low volume quarter for any type of product anyway.

David MacGregor -- Longbow Research -- Analyst

Understood. And then last question, just on you talked about the boat shows. It sounds very positive at a high level. I wondered if you could just dig in a little deeper and maybe talk about one or two things specifically that you saw or took away from the boat shows that's give me your higher level of confidence in 2019?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

It's just trends -- year-over-year trends with shows.

David MacGregor -- Longbow Research -- Analyst

Is it an order patterns or you see in certain types of customers are typically good leading indicators?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

It's contracted units, it shows. We had -- the selling -- boat shows are selling events and so you take deposits on their contract. You just look at trends and then talked to other folks in the industry and see what they're seeing as well.

David MacGregor -- Longbow Research -- Analyst

Okay. And it -- it's positive -- it is broadly positive you're saying?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

It's yes, improving, yeah.

David MacGregor -- Longbow Research -- Analyst

Okay. Thanks very much.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Thank you.

Brett McGill -- President and Chief Executive Officer

Thank you.

Operator

We'll now take our next question from James Hardiman of Wedbush Securities. Please go ahead.

James Hardiman -- Wedbush Securities -- Analyst

Hi. Good morning, guys.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Good morning.

James Hardiman -- Wedbush Securities -- Analyst

Thanks for taking my call here. So at the end of the day it sounds like the first quarter units were maybe a little bit worse than we expected, but ASP doing really well. I wanted to maybe tie that to how we were thinking about guidance? You guys had talked about 5% to 10% same-store sales. And I think on the last call you said that that's generally based on the notion that the industry would be up about 5% that you would get a little bit of pricing.

So I guess three questions on that. One, any reason to think that algorithm has changed with respect to the industry or do we still think 5% domestic industry growth is reasonable? Two, do we think that the ASP growth that you saw in the quarter which is really good, do we think that's sustainable? And three, if you could maybe give us an idea, are we sort of back to that 5% to 10% run rate for January at least the first three weeks of January. Particularly on the unit side, just because that seems to be what maybe wasn't quite as good in the first quarter?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

I can touch based on a couple of these. No one that we've talked to has backed off on their thoughts for 2019 in terms of the industry unit outlook of a single-digit growth or whether mid single-digit which can be anywhere from 4%, 5%, 6% something like that. There's -- within that number, there's obviously various categories of product and as you open up the categories of product, some are growing faster than others, which were all cognizant about as are you guys.

But I think overall today, we still feel good about the industry growth and we still feel good about our opportunities that 5% to 10% same-store sales growth with a combination of the two of those which would imply that we do feel like we're going to continue to get ASP expansion that we can't comment specifically on January other than to tell you it's going to be up in same-store sales when it closes.

James Hardiman -- Wedbush Securities -- Analyst

Okay. And then just last thing for me. Any -- you've talked about category level insights. But maybe geography within the first quarter any regions better or worse than others. I'm trying to figure out if weather was meaningful obviously, weather a bigger deal as you get further up the coast and inland maybe versus Florida?

Brett McGill -- President and Chief Executive Officer

Commenting on, they're just, I think weather affected some recent boat show attendants' figures that are out there, that was the contributing factor I think the attendants so kind of comment on that. But generally, we're not seeing any specific geographic issues or concerns overall.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

It's usually a quarter that is led by Florida Headinghouse (ph), Northerners come back here and you got the Fort Lauderdale Boat Shows. So the edge would probably go to Florida in the quarter, but a sort of natural in this quarter.

James Hardiman -- Wedbush Securities -- Analyst

Okay. Appreciate it. Good luck to start the season guys.

Brett McGill -- President and Chief Executive Officer

Thanks. Yeah, thanks James.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Thank you.

Operator

(Operator Instructions) We'll take our next question from Ronald Bookbinder of IFS Securities. Please go ahead.

Ronald Bookbinder -- IFS Securities -- Analyst

Good morning and congratulations on great execution.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Thanks, Ron.

Ronald Bookbinder -- IFS Securities -- Analyst

On the outboards in the fall were fair -- supply of outboards was fairly tight. Have the manufacturers been able to catch up during the off season? And how's it look for the New Year?

Brett McGill -- President and Chief Executive Officer

Yeah, we kind of seeing as the summer we were pretty constrained. It felt like, but it feels like things are getting more caught up and we don't. We're not running across those issues as much as we were, so it feels caught up.

Ronald Bookbinder -- IFS Securities -- Analyst

Okay. And with -- it seems like there might have been a little weakness in the lower priced units. Are people moving to used boats and how is your supply of used boats and how's the pricing on used boats' year-over-year comparing?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Late model trades are always highly sought after, and which is what we have. We don't see any unusual trends of people moving to used boats. We see trends of people pretty interested in the new models that are coming out now from our manufacturing partners, which are really a good lineup for 2019, and I think generally used boat pricing because of the lack of late model that -- it's fairly strong.

Brett McGill -- President and Chief Executive Officer

That's held up.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Yeah it's held up.

Brett McGill -- President and Chief Executive Officer

Yeah.

Ronald Bookbinder -- IFS Securities -- Analyst

And you mentioned the Galeon and Azimut boats. How are the customers -- are -- responding that might have been looking for a Sea Ray? But one -- something that isn't going to be continued or something? Are they moving over to those types of boats? And are they satisfied with that? Or are they looking for something else? maybe a marine dealer or moving out of a category?

Brett McGill -- President and Chief Executive Officer

Yeah, I think some of this starts with recognizing that the Galeon and Azimut, we've been carrying these brands for quite sometimes, our customers see these boats on the water. They see the quality, they see how they're holding up. So when the Sea Ray announcement came, when we had to shift people that way, this wasn't a -- hey, guess what, we have a new product for you. This was we've been carrying this quality product -- now we have to market and train and get customers into the products. So it's -- we're still in that transition. This boat show season that we're looking at right now is that great opportunity to do some launches of the product for maybe consumers that haven't seen it. So it's not an easy task, but it sure does help when we've been successfully carrying the product for a bunch of years now.

Ronald Bookbinder -- IFS Securities -- Analyst

Okay. And lastly on health insurance. It had been running high the past several quarters. Has it leveled off? And is there an opportunity that it could be worse or should we just expect it to continue at the same level?

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Well, so thankfully I did not have to talk about health insurance has an increased expense this quarter, it is leveled off now, you remember we gave guidance we did not assume that it was going to drop, and is -- so it's not dropped, it's leveled off. So we got to keep, in theory, that I said on the calls before, the actuaries that, they get it right over time and so in theory, it's possible to get a reduction as we go through 2019. But today, at least through the first quarter, we don't see it. But we also don't see growth. So hopefully as we get into the March quarter and June quarter, maybe we have a nicer discussion even around healthcare costs. But yeah thanks for bringing that up though.

Ronald Bookbinder -- IFS Securities -- Analyst

Okay. Great and thank you for taking my questions and good luck in as we move into the season.

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Thanks, Ron.

Brett McGill -- President and Chief Executive Officer

Thanks, Ron.

Operator

It appears there are no further questions at this time. Mr. McGill, I'd like to turn the conference back to you for any additional or closing remarks.

Brett McGill -- President and Chief Executive Officer

All right. So thank you, everybody for joining us today. Mike and I are available to answer your questions before we head off to the New York Boat Show a little bit later today and thanks for joining us and enjoy the rest of your day.

Operator

This concludes today's call. Thank you all for your participation. You may now disconnect.

Duration: 38 minutes

Call participants:

Brad Cohen -- Investor Relations

Michael McLamb -- Executive Vice President, Chief Financial Officer and Secretary

Brett McGill -- President and Chief Executive Officer

Fred Wightman -- Citi -- Analyst

Scott Stember -- C.L. King & Associates -- Analyst

Joseph Altobello -- Raymond James -- Analyst

Seth Woolf -- Northcoast Research -- Analyst

David MacGregor -- Longbow Research -- Analyst

James Hardiman -- Wedbush Securities -- Analyst

Ronald Bookbinder -- IFS Securities -- Analyst

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