Q2 2020 Earnings Call
Greetings and welcome to the Marine Max.
Incorporated second quarter 2020 earnings call.
At this time, all participants and they listen only mode. A brief question answer session will follow the formal presentation.
Anyone should require operator systems during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded and it's now my pleasure to introduce your host Brad Cohen Investor Relations for Marine Max. Thank you Mr. Cohen you may begin.
Thank you operator, good morning, everyone and thanks for joining this discussion marine Max's 2020.
Second quarter earnings conference call I'm sure that you've always seem to copy the press release I went out this morning, but if not please call Linda camera at 77, five to 11712 and she will email one to you right away I would now like interest management team and Max Mr., Brett Mcgill President Chief Executive Officer Mr., Mike.
<unk> Chief Financial Officer, The company 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 Mr., Mike Mclamb, Mike.
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 in weather general economic conditions in the level of consumer spending the company's ability to capitalize on opportunities or grow its marketshare and numerous other factors identified in our form 10-K, and other filings with the six.
He's an exchange Commission.
That might like to turn the call over to Brett right.
Thank you, Mike and good morning, everyone.
I want to start by saying how proud I am of our team's ability to evaluate the impact act quickly and implement changes in how we operate our business during this global pandemic.
There are so many stories of power teams agility and grid to overcome the challenges we face as the impact in the virus expanded across the country and work.
It's worth noting that we lost very few sales that we were contracted afford the virus. They continue to sell both after the virus that is.
We had to think differently and developing a new approach to achieve these results.
I'm humbled and proud to be able to lead such an outstanding passionate and devoted team.
We understand that we have a responsibility to both our local communities and the boating community at large, including the health and wellbeing of our team their families and our customers as what was the welfare of our local economy.
Well, we are taking additional health and safety actions, we stand by our commitment to provide our customers and their families. The best possible boating experience.
And supported this we're offering multiple approaches for our customers to continue to safely uncomfortably enjoy their experience on the water.
We have also clearly seen a very strong desire for those in warmer markets to get out in the water enjoyed time, what their family safely and away from crowds. We saw very similar trend. Following the events of 911, however that desire seems even stronger now.
We believe this will be replicated in all parts of the country as warmer weather moves that.
We think boating could be one of the beneficiaries from this changed new world in which we now live.
People will likely travel lessen the near term and instead stay close to home boating is a great way to escape the stresses of everyday life and strengthen the bonds at family and friends, while avoiding crowds.
Even with the impact of covert 19, we still generated positive same store sales in the March quarter.
We experienced strong performance across all lines of business in January February was starting to feel the impact of the virus in March.
As I sit here today, the majority of our 59 locations are partially.
More fully operational where now offering private personal showings as well as virtual appointments.
We've also increased the frequency of professional cleaning crews to provide further deep cleaning of our stores and inventory.
Importantly, our digital platform is fully operational and available 24, seven with our full selection of boats and yachts as well as our expertise online to answer customers question and help them find a boat virtual.
New tools are available to hold their dreamboat and complete the process from the comfort and safety of their home.
In the quarter, we saw growth across many brands and segments and we are proud to have driven same store sales increased 12% in the first six months of year on top of the 7% a year ago.
It was strengthened just about all key categories.
Let me give some additional color on our business in the quarter, our strategy of investing in high margin businesses and best in class class technology served us well, we once again significantly expanded our gross margins for another quarter.
This was due to the growth in our higher margin businesses.
Our strength in higher margin businesses, such as finance insurance brokerage Marina and service operations uniquely allows us to be incrementally more aggressive in both margins as we were in March.
The majority of our higher margin success is due to the combination of the phrase your acquisition in July of 19, and our continued focus and training in these areas of our business.
As a reminder, razor is a super yacht services company and a world leader in yacht brokerage charter management crude placement and new build consultation operating all over the world.
We also continue to benefit from our best in class fully integrated CRM system and data analytics platform, creating a seamless experience for our customers.
Well the stay at home orders were mandated across the country. We were able to quickly migrate from a store based retailer to a virtual retailer. Thanks to these prior system into investments.
Our team continues to hone it skillset doing virtual demonstrations of boats and remote closings needed to purchase about we've been execute streaming virtual christenings, what our customers take delivery.
We're also continuing our online boat shows as well as our digital events for customers. These investments position us well for the current environment and obviously the future.
As optimizing cash flow remains a top priority our team is focused on managing the controllables, including inventory and expenses.
As a reminder, we significantly improved our inventory in the December quarter, especially given the dollars a number of units we delivered.
With the onset of covert 19, we reacted swiftly and proactively work with our manufacturing partners to further align future orders.
As we head into the important June quarter, the age and mix of our inventory is in good position.
And this uncertain environment were able to make further adjustments to ensure we are generating cash and moving inventory of the leave the environment overall is at a rational point.
As a result of the virus. We've also taken actions to reduce expenses, including Furloughing team members in areas, where dictated by local guidelines.
As we closely monitor industry conditions in the coming months, we will continue to review our expense structure and make additional adjustments as needed.
There's no question, we are uncertain times.
However, our cycle tested management team has demonstrated through past challenge economic time that our business model and customers are resilient our balance sheet as stronger today with our significant unencumbered real estate holdings flexible leases cost reductions and until.
Leveraged inventory.
We believe we can both overcome and potentially capitalize on expanding share or other opportunities that may arise during the current situation.
We are confident that has cope with 19 received and demand stabilizes our customers will value more now than ever time spent on the water with family and friends and boating has an aspiration a lifestyle will be a greater demand.
And with that update I will ask Mike provide more detailed comments from the quarter Mike.
Thank you Brett and good morning again, everyone. Let me also thank our team for their performance in the quarter, especially during the onset of the virus.
For the quarter revenue grew to over 308 million the growth was driven by an increase of 1% in same store sales, which was on top of 12% last year.
I would add the January February were up considerably over the prior year. However, as the virus impact began in March with the start of government mandates our store traffic and sales were obviously impacted.
The trend perspective March revenue was down about 11% from last year, which given the news and the need to close or partially closed stores speaks to the strength of our team, but our customers passion for boating.
Our gross margins expanded 110 basis points to 25 and a half for said.
As Bret said the increase in margins was driven by our higher margin businesses, including the Frazier acquisition.
Offset by reduced new and used both through our gross margins as we remain incrementally more aggressive driving sales.
Excluding Frazier gross margins would've been close to flat due to the growth at our other higher margin businesses.
Selling general and administrative expenses increased to 69 million, primarily due to the 2019 acquisitions of phrase you're in sales husky.
Excluding those two additions SGN a would have declined in absolute dollars.
We have taken additional actions to reduce expenses as a result of the CRO to buyers, including Furloughing team members rent abatements and other cost reduction initiatives where appropriate.
We remain proactive.
And we'll make adjustments as required by industry conditions.
Our pre tax earnings were 6.7 million compared to 7.2 million last year. Our net income was 5.1 million with flat earnings per diluted share of 23 cents.
Turning to our balance sheet.
At quarter end, we had about 64 million in cash however, as a reminder, we have substantial cash in the form of Unlevered inventory.
Our inventory levels at quarter end were up 12% to 507 million.
Absent the Celski merger the increase was about 8%, which is below our year to date same store sales growth of 12%.
As we communicated in prior quarters.
Managing our inventory as a main priority.
With the onset of the virus, we continued to be proactive and worked with our manufacturers to align our inventory.
We do expect inventory to decline during the June quarter. The exact degree depends on many factors, including sales and the timing of our manufacturers starting to build and ship again.
Looking at our liabilities, our short term borrowings increased about 65 million due primarily to the growth in inventory.
Customer deposits, while not the best predictor of near term sales because they can be lumpy due to the size of deposits and whether trade is involved or not are down 20%.
This is partly due to the material Palm Beach boat show being canceled in late March because of the buyers.
Our current ratio stands at 1.38, and our total liabilities to tangible net worth ratio is 1.51.
Both our strong balance sheet metrics.
Our tangible net worth was 322 million or about $14 of 66 cents per share.
We own about half of our locations, which are all debt free and we have no additional long term debt.
Many of our properties are located at high traffic highly desirable locations.
As our press release stated combining our cash with our leverage available on our line provides us with 90 million of liquidity today.
This is before we tap into the remaining hundred million of Unlevered inventory or the considerable real estate we own.
Our balance sheet has always been a formidable strategic advantage that allows us to capitalize on opportunities as they arise and protects us and uncertain times such as now.
As previously disclosed we withdrew our 2020 guidance given the continued uncertainties related to covert 19.
I will make a few comments on current trends some of these comments may be surprising.
When the buyers first hit we did see a significant deceleration of contracts written in our stores.
However towards the end of March we were fighting our way back from those declines.
Thus far in April our trend has turned positive.
Why our day to day sales trend shows positive signs, we still see this period as uncertain.
However, the activity we are seeing gives us confidence to state that as summer approaches, we expect to boating lifestyle be alive and well throughout the country.
With those comments I'll now turn the call back over to Brett for some closing comments Brett.
Thank you Mike.
Again, I want to thank our teams for their efforts in servicing our customers as their needs continue to change in the current environment.
We acted swiftly introducing new ways to reach our customers in order to solve their boating needs.
The cobot 19 pandemic is complex and evolving rapidly we will continue to monitor ongoing developments to take action to best position Marine backs for both the short and long term.
Our differentiated customer centric approach ensures marine Max will be there to meet the needs of boating enthusiast, who now more than ever we'll be spending time out on the water close to home.
And with that operator lets open up the call for questions.
Thank you we will now be conducting a question answer session.
As a reminder, please press star one on your telephone keypad, if you'd like to ask a question a confirmation tone will indicate your line is in the question acute you May also press star too if you would like to remove your question from acute participants using speaker equipment. It may be necessary for you to pick up your handset before pressing the star keys, one moment. Please while we now.
Both for questions.
Our first question comes from Eric Wold of B. Riley FBR, Sir your line is not allied.
Couple of questions I guess one.
You talk about obviously wanting to reduce inventories from these always manage inventories given the uncertainty you'd expect inventories declined in the June quarter.
Balance that.
With Oems clearly wanting to kind of start shipping again.
To restarting the plants from Nicole good shutdown any kind of.
Indications going to.
Wired purchases is pointing to an outstanding order that need to be filled are you going to manage both inside.
Yes, Hey, Eric.
Yeah we've.
Been talking to our manufactured probably in some cases twice a week.
Just trying to coordinate with them what it looks like since they've shut down.
When do they think there'll be open what is their supply chain look like in kind of getting dates trying to prioritize boats that we have sold to customers that are being built in trying to get those pushed up in the front. So.
It's hard to answer exactly how that's all going to line up until they are fully operational and we see it come in but we have been working on planning that in detail.
I tell you where they're looking at trends as closely as we are in let me know manufacturer wants to overproduce boats. They want to try to have a good balance with the.
With what the industry seeing at retail and.
I'd say, we work very closely with our manufacturing partners to try to get to the to the right answer. So it's got a it's gone fairly well all the dialogue with that with our manufacturing partners.
No you mentioned the.
Yes, I know, it's still uncertain rather than trying to lease in turn positive April somewhat from the downturn in March.
That been driven more by digital virtual buying offering or is it still mostly in person traffic and I guess.
Yes.
Maybe just one more color going to what you seem to use of that digital virtual offering it in terms of deal maybe what percentage of interaction younger I'd frame and how does that impact.
Buying behavior time to close those going again.
Yes, I think commenting on store traffic from a walk up so to speak almost went to nothing people.
Stopped walking up to the front of our stores now everybody is always used digital tools to reach out and make an inquiry ahead of time I think thats just been highly amplified and we've been working for several years now and some more advanced tools, we're able to launch those early.
So I'd say, it's a bit both they walk in traffic almost nonexistent in less it's a private appointment under safety precautions all of the generation of that traffic has been digital.
Okay, and then lastly from me.
On the real estate position.
What are your options with that I'm, assuming you wouldn't like look to sell those outriders sale leaseback those given your desire to kind of maintain the use of those going to longer term yield is that more of kind of.
Mortgage finance option or maybe kind of give a sense of where you could do there if need be have good. Good question. Your our desire is always to own. This property. It always has been so sale leaseback you eventually lose control that so well that's an option I don't see us exercise and I don't recall that we need to I think.
Putting mortgages on the property would be a potentially smart thing to do depending on the right where the rates are and the rate environment.
I'll remind you had this team manage the business through 2008 into 2008.
We had something like 44 million a mortgages.
When Lehman collapsed and within it seems like three or four months, we pay those off because we generated so much cash that we never needed. The mortgage anymore properties back then we're exploring all options as the press release says we're looking at different things that we could do.
Along the real estate line, but something like a mortgage would make the most sense.
Perfect. Thanks, guys. Thank you.
Thank you. Our next question comes from Joe Altobello with Raymond James You May proceed with your question.
Thanks, guys good morning.
Wonderful up on Earth first question regarding the trends in March and April obviously marched down 11 April.
With the positive here curious how that compares to the rest of the industry.
I would imagine you guys are probably taking some here given your investments in technology over the past few years, but I was wondering.
If the rest of the industry is also seeing the same positive trends in April or are you guys more of an outlier.
I think.
It's hard to say I mean, we you hear about some industry activity.
You do see a lot of people out on the water a lot of people are boating.
We.
I hope that our technologies and our execution is helping us gained some share but boating community is out so I would imagine, it's probably pretty decent for most now whether and conditions and states it's going to vary.
Got it okay just to follow up on that in terms of categories, where you're seeing correct. I think the market's ESI data seem to indicate that on the aluminum cyberseal that better trends for example, pontoon element that versus fiberglass did you guys see that as well or has the strength that you've seen an april or proven April been Lars.
The broad base.
I'll tell you Joe if you look at the March data were the key categories that we.
Participate in were down gosh, 20% was that was the best one they were all the way up to like 65% down or 55% down obviously, we did not experience that so to your point on shares I do think in the month of March we did take market share.
I'd tell you what we're seeing in April which my comments are year over year comparisons that they're not they're not sequential or year over year, which is pretty encouraging.
We're seeing pretty good trends.
Really across the board.
It could be one week.
Premium center console seemed a little stronger could be the next week.
Recreational Rick run about day, but it seems stronger but generally.
Theres, a pretty good desire to get out in the water right now expect as Bret said, especially more not warmer markets.
I was just going out. The next question is is that mostly florida or that pretty spread out geographically as well.
I know, there's some good trends up north well the harder hit regions of the country, clearly youre going to be a little slower to first of all get people out on the water and the lockdowns are varying levels.
Got it okay. Thank you guys appreciate it thank you Joe.
Thank you. Our next question comes from Ryan sick dealt with Craig Hallum. Sir you May proceed with request.
Thanks, guys for taking your questions.
Congrats on the positive trends here in April.
I think shocking to many so I think work.
Maybe just that we haven't talked much about the cost side, you mentioned, you've done some furloughing, but anyway to quantify.
How much operating expenses have been taken out temporarily here.
Filter in place restrictions.
We haven't quantified at ride to good just stated publicly we've obviously furloughed our intention is to bring as many people back as fast as we can as the stores operate and opened so.
We'd want to throw a number out the exit is little bit uncertain as to how long a certain store maybe.
Experiencing furloughs versus another store, but.
I mentioned on the call Furloughing renovate men's we have spoken to a number of our landlords.
And we're trying to be a good steward, if you will asking for support and help.
Where we really needed and if we really needed.
Given our balance sheet strength in the business that we're seeing we're we're being measured in that and that approach.
I did mentioned on the call that if you look at the cdna specifically the quarter.
We would it be down in absolute dollars.
If it wasn't for the acquisitions, we did a frazier and sales gains you can kind of see the efforts. We did in 2019, specifically in the summer of 2019.
Where we did reduce some duplicated stores and other things long before the virus has helped it's paid off so our expense structure is lower today than it was a year ago absent the the acquisitions.
And then.
Maybe month to date for April or over the past few weeks. However, you want to refer to it but what do you guys seem from a promotional environment and then how it margins held up relative to kind of pre cobot.
Yes, I think I mentioned in the script that we were yes, it's still seems pretty rational where there's.
It seems like kind of normal discounting demand is good.
We're we're putting a lot of efforts into marketing and we are looking at our inventory very strategically Lee and pricing some product right, where it needs to be the key we want to keep our inventory healthy and there is uncertainty ahead. So you're moving inventory right now is good but no no excessive.
Pressure out there that we see right now.
Ryan, it's probably worth commenting it wasn't in the prepared remarks, but it's it's such a different time right now that it was in 2008 I mean, most of the wholesale lenders, who finance the inventory if not all of them have voluntarily waived curtailments for dealers in our industry and probably all industries for that matter.
I mean that did not happen in 2008, and then the retail lending environment is still pretty darn healthy right now.
And.
2008 that shut off for a period of time. So there's a couple of distinct differences between right now between other dark days for our industry that are it's much much different today and I'd say much better today at least currently so thats a we're not seeing the.
Massive jump in repossessions that other things like that that we saw in 2008.
Good one more question for me and then I'll hop back in the Q.
You know impressive that April can flip positive virtually all online can you think.
Given your technology investments, what you're hearing from customers and kind of going digital right. Now do you think this will have a structural shift on the industry or an acceleration kinda to the digital online.
Buying a boats and then I presume you guys are.
Seem relatively better position, there going forward than others, but how do you think about that from a competition to potential market shirt standpoint. Thanks. Good luck guys. Thanks, well. That's a good question I think everybody's we've been planning in looking at that shift all industries are seeing that shift and we've been working towards that direction. This this.
Unfortunate event has probably been a little bit of a catalyst to jumpstart that for all of us but.
Yes, we're still a relationship business getting people face to face and really engaging with them, but our tools and digital tools to get them further down the pipeline and more comfortable with marine Max and our products. We feel like gives a clear advantage and I think it will reshape the way the business has conducted.
Going forward.
You guys. Thank you good luck, Brian I appreciate it.
Thank you. Our next question comes from Mike Swartz with Suntrust. Please proceed with your question.
Hey, guys. Good morning, good morning.
Hey, a quick question for you, Mike and I apologize if I missed this but did you say just the break down the price versus units during the quarter.
I actually I did not good question. So our units were down in the ER.
Mid single digit in the quarter, so it'd be skewed towards prices what drove the 1%.
In really all because the month of March, whereas I think for our segments.
You know the industry well for our segments.
I mean, 20% the 55% is what they were down in the month of margin, we were down something like a in the mid teens up to like that in the month.
Okay. That's great. Thanks for that the color and then just wanted to touch on on the impact of West Palm Beach that.
Decent size show moving from March or not moving from March I guess cancelled this year I didn't get any quantification on how that impacted the quarter, how that impacts backlogs and maybe any cost that you had in the quarter. Then obviously you won't be able to to leverage their through sales.
I don't have the cost data in front of me, we obviously had some costs with no sales.
It's a material show, though it's a double digit millions of dollars' worth of business now not all that would happen in March probably most of it would happen. After March some would come into month. It clearly would have an impact our customer deposit line. It would clearly have an impact on our trend data. So some when we're talking tribe in April.
That's a year over year bases of whats contracted and we did not have the Palm Beach boat show and we commented that we're tracking positive.
And so I think it speaks to the digital tools that we've invested in the breadth that Brett mentioned it also they are team and our customers passion for being on the water right now because it is a meaningful show as you know Mike So.
That did not happen this year.
Okay, and safe to say, the backlogs going into going or I guess, where they stand today would be down is that the right way to think about that.
Our back now so our backlog is.
The would up what I'm talking about in terms of April trends in terms of the contracts were writing on a year over year basis are tracking tire today now that could change in a week, but they are tracking higher today.
Okay, great. Thank you for that.
And then just some of the steps that we're playing lenders have taken to help out the dealers. When are you taking advantage of that right now and then is there any way to think about the cash savings monthly while that's going on.
Yes, good question might kind of ties to the same comments I made a little while ago about being a good Stewart and and asking people for help where we think we needed we have not asked to have the curtailments waived as of now we can we talk to our lenders about it.
Just given the trends that we're seeing given our financial statement strength, our liquidity growing in the March quarter, we have not asked for that so we will if we think we need to but as of today, we don't think we need to.
Okay, great. Thanks, that's it for me.
Thank you. Our next question comes from Scott Stember of CL King. Please proceed with your question.
Good morning, and thanks for taking my questions.
Could you frame out of the level of of.
Business be up in April just to give us a sense of.
How positive we are just so give an idea obviously.
The June quarter oil is always going to be difficult to model just given everything that you're hearing about in the economy, but now we hear that sales are actually.
Okay or trending up in April just just give us a sense maybe of how up they work or how up they are.
Well I you know I comment in general one thing we're able to do is with some of our tools back to some of the analytics. We have we can literally look at by day three day sales trends year over year. The exact same three day seven days 14 days and.
Like Mike said end of March was harsh and it started to climb back and as of now we're actually seeing some redone seven day trends that are pointing upwards and positive.
It's probably best that we not disclose the actual percentages and things that were track it up right now until we see a longer period of trends I would also say Scott.
Got it okay.
And just following up on the non boat sales now that you guys have effectively.
Gone to a virtual platform how is the non boat sales how are they performing now that you do not have really customers coming into the showroom hasn't been any follow up or is it actually gone up.
Yes, I think that it's been a you know in some of its the time of year has.
You know lined up okay, meaning up north of the service activity or not in every state or we put in people back in the water so you're using.
For people coming in for service and those sort of things some of the P. in a business that you are getting walk introduced during delivery time is not there. So it definitely put a strain on the other parts of the business I'll call that service and parts because not as many people are coming in and not as many people are there but its a.
It's.
It seems to be run in pretty good it'll continue to grow at the summer comes upon us.
All right so and the comment that you made just to be clear about running up in April was that everything or was that just for boats.
We were cut we were company specifically on boats.
Okay.
Got it.
That's all I have thank you.
Thank you.
Thank you. Our next question comes from James Hardiman with Wedbush Securities. Please proceed with your question.
Hi, Good morning, guys and congrats on getting things turn around here in April it's Uh Huh, that's no easy feat in this environment.
Thanks James.
Sure so.
A couple of questions for me.
Brett you talked about in your prepared remarks.
Something about other opportunities that may arise over the course of this pandemic seemed like that was sort of an open ended comment, but do you want it to get asked about but but what could that look like.
Police since the last downturn you guys have.
Both expanded your dealer base and expanded the brands that you carry what are the opportunity this time around.
Well I think you kind of answered it with the open ended piece of you know we're looking at all those things.
Brands and various markets Marina opportunities that may or may not come up in various markets.
So I'd say, it's kind of the same.
You know pattern, we've had over the years, we'll continue to look at that and since our balance sheet is strong when the timings right of course and things are a little more stable and theres a little less uncertainty about what next week looks like what we'll look to capitalize on opportunities that come up.
Makes sense and then you touched on a little bit of that but could you to the extent you feel comfortable just talk us through.
Some of the geography around the country I mean, we haven't.
Seems like we're working with some very different restrictions in certain states.
Some some state some geography, you recreational boating is essentially shut down right now I don't know how much that's impacting both sales and ultimately the your ability to deliver boats, but maybe just walk us.
Region by region, or even more granular than that how the various restriction do you think are impacting your business and what you saw it looks like if we slowly open back up again.
Yes, it's a great question and it every day it changes for for a while there it was changing very rapidly and we had literally a response team working on what that day held for us and looking at the local regulations and.
Really the lay of the land was.
Boating was allowed to be opened in that slowly changed in a few markets, where they restricted boating activity and it's actually if you go out there and look at its only a very few set of markets were boating itself is restricted and but most of Florida people can get out on a both theres a handful of marinas close obviously you get closer to.
Areas like Miami in its much more restrictive.
Baltimore, New York, but just recently they've announced.
Boating is open in the Tri state area up there.
Some real northern markets, even if boating was opened it wasnt time to go boating, but I would say, it's more leaning towards most areas that we operate in our open for boating.
With limitations on that of course and people are.
Voting in a responsible fashion, we're marketing that other industry arms or marketing safe boating and so on so.
Uh huh.
When the when we start opening up the other parts of the economy I think that will help that boating is somewhat opened and it'll just be more about what less restrictions are there.
Okay, and just to be clear it sounds like there isn't really anywhere in the in the U.S. where.
Obviously, you can do a lot of the the search and even the purchase presumably online.
There are many places that are restricting delivery right. The final sale in anyway is there.
There might be a couple but it's it you know a lot of like if up North you bought or boat right. Now you may not be going far with that so I'd say, we can do a proper delivery with social distancing and all the safety requirements in place kind of one on one and its a.
It's happening that way for the markets we operated.
Okay, and then just lastly from me I mean, everything sounds pretty pretty upbeat I mean, obviously that very limited data in terms of things turning around here. So I know you don't want to extrapolate too much but.
Do you feel comfortable saying that youre going to make money in the second half of the year first half was pretty good you made 64 cents.
What are the odds that that.
We see a loss during the back half and then along those same line.
I don't know last recession, you had to contract your dealer base pretty meaningfully doesn't seem like were anywhere near being in a position where were you would have to go through those sorts of steps again.
I would use your your opening statement about 'em, we have limited data right now I think it would be premature for us to be talking about our what our profit thoughts are obviously.
You've got to hurt our comments we feel.
We feel better today, we I'll try my comment into the 2008 period. Those of you followed the company back and really the conference calls did not sound like this they cited a little more.
A dramatic and the actions we were taken were more dramatic.
Given what we see today.
From an industry perspective, I don't think the industry is going to experience what it experienced in 2008, but there is uncertainty and what it what I will say is based on what we've seen we've taken the rate actions boast on costs, both on costs and marketing efforts and execution that seem to be lined up and we'll take.
Further action if needed depending on what changes or.
I tried to get back to normal sooner than later.
Alright stuff really appreciate it guys. Thank you. Thank you very much.
Thank you. Our next question comes from David Macgregor with Longbow Research. Please proceed with your question.
Hi, Good morning, everyone hope you're well. Thank you. Thank you.
If you did in your prepared remarks say that it was still a relatively rational environment, but at the same time. You also mentioned that you see more promotional activity. So I wonder if you could just talk about sort of.
Where within those opposing dynamics you think the second half of April or the second half of the quarter is going to play out.
A couple of follow ups after that.
Yes, the additional promotional activities, just probably really centered around the fact that trying to generate more interest remotely or digitally than you would when you have normal walk in traffic in the normal spring time, So you might have to offer.
Do more marketing maybe offer a few more promotional ideas to get people to raise their hands, that's really more about trying to change people's you're not being able to walk into stores. What can you do to create their interest right.
Is that essentially discounting or are there other forms of promotion that art just impactful to the gross margin line.
There is marketing efforts there is some discounting because we're looking at the uncertainty in deciding inventory has some aging to it we're going to be much more aggressive there to try to get ahead of things. So yes. There is some some of that okay.
Just pure remind us again, just as the mix as it stands today between boat sales and service revenues.
Yes, both sales new and used are going to be close to 80% of our total revenue then service parts Marina brokerage the other businesses that we have a roughly 20% of our total rather low 20%. Okay. That's helpful. And then can you talk about your ability to flex SGN a if in fact this good news see here in early April doesn't extend.
Having to deal with more negative environment over the next couple of quarters, Yes, generally I can talk that about a third of our expenses are pretty fixed.
About a third just for easy math are what I'd call semi fixed I mean, you can you can start cutting them in the third that our fixed or pretty much the store operations.
And then roughly a third is not quite ready to slow the greater than that as personnel and and obviously, we've we've done some furlough and taking some actions around our team members.
So.
But I should comment within that within the semi fixed in the personnel. There some level of that that's variable like commissions and and our pay plans and all of that type of stuff.
Given what we're seeing today, we don't think there's.
The whole lot of stressing that we need to do to those models, though other than what we've already done today and right now we're trying to keep our team working in our furloughs that kind of related to.
Good business sense, but also just where were restricted only so many people can operate in the store, so where we had to make some furloughs, but we're doing our best to keep our team.
Working sure. It makes sense and then last question I, just just I'm trying to think about how this extends out.
You got as you pointed out very little traffic coming through the stores most of its online.
The close rate on it on a store sale different from an online sales.
Oh I don't think we have that data readily available the this quickly.
Looking at the data but.
Generally when you get an online digital engagement.
You know you're taking all the same actions. After that's just how you get the person engage and get I'm comfortable with how to do it. So I don't know if I have that answer right now I'm not sure there's going to be a whole lot.
Different or fallout of many.
The amount of activity remotely with the customer it and discussions with the customer it's probably a great question for as we get into the June quarter, we'll have better data on that David I would just expect it's more extrapolated sales process and to that extent, though.
It might be better opportunity to forecast I just.
If you could come up with some sense, what your historically the closer it spend but I guess assumption here on this so right yeah. Okay. All right. Thanks very much. Good luck. Thank you very much.
Thank you we have no further questions at this time I would now like to turn the floor back over to Mr. Mcgill for closing remarks.
Thank you. Thank you for joining the call today, and we hope you and your families are all safe and doing well, we'd also like to thank our first responders and medical professionals working to keep us all safe and with the summer approaching we hope you can get out on the water enjoy some boating and Mike and I are available today. So please reach out if you have any additional questions and we'll.
Look forward to updating you on our progress on our next call. Thank you.
Ladies and gentlemen. This has concluded today's teleconference. You may now disconnect. Your lines at this time. Thank you for your participation.